A reader of this blog asked a good question this weekend: what happens to sales when rates rise?

This is an intriguing question.  While I had my suspicions, I wasn’t sure what I would find so I put together this little image from Twin Cities MN Pending Sales and the 10 Year Treasury Note.  While the 10yr isn’t a direct mortgage interest rate gauge, it correlates very closely.  This chart is on a 5 year scale.

(Pending home sales data from MAAR, click image to see larger picture)

What we see from this chart is that the housing market is very cyclical but the influence of interest rates on the housing market isn’t all that clear.  While rates definitely play a role in housing demand, to me it doesn’t appear to be the dominant factor in housing sales activity.

There are lots of things that may impact housing in 2010 – anyone else want to share their thoughts?