Consumer sentiment is also strong—at its highest level since before the Great Recession.

Housing prices are going up. In fact, they have been rising for 53 straight months in the US. In the first three quarters of 2016 alone, homeowners added $837 billion in total equity.

A large group of Millennials is entering their mid-30s, a key age for household formation.

GlobeSt.com: So, what does this mean for the housing industry?

Deermount: Given the above, one might think that consumer sentiment toward housing would be on the rise as well. However, it's doing just the opposite as Diana Olick wrote for CNBC (emphasis mine):

“Consumer sentiment for home buying is falling despite the fact that more young Americans are employed and more Millennials are aging into their prime home-buying years.

“Why the wet blanket on home sentiment? It's twofold: A diminishing number of consumers expect the recent spike in mortgage rates to abate, and even fewer consumers say their household income is significantly higher today than it was a year ago, according to a monthly survey by Fannie Mae.

'Despite the post-election bump in general consumer attitudes, a rapid rise in mortgage-rate expectations has tamped down home-purchase sentiment, at least in the near term. A spike in economic optimism in the immediate aftermath of an election is typical. Whether consumers will sustain this level of optimism into 2017 remains unclear,' said Doug Duncan, senior vice president and chief economist at Fannie Mae.'”

GlobeSt.com: How do interest rates fit into the picture?

Deermount: Interest rates have risen substantially since early November in expectation of fiscal stimulus, tax cuts and easing conditions in the credit market. Taken on their own, rising interest rates are generally not good for the housing market since nearly everyone borrows money to buy a home, and higher mortgage rates reduce purchasing power. However, if incomes rise as well, they can (at least partially) offset the increase in cost.

But here's the rub: interest rates rise and fall based on future inflation expectations. And, while that move is already taking place, the aforementioned fiscal stimulus, tax cuts and reduction in bank regulations have not. This divergence actually began during the summer because rates increased from the Brexit low, but it seems to have picked up speed since the end of October when rates really began to move upward.

Given the current makeup of the federal government, it is likely we will have some level of fiscal stimulus, tax cuts and bank regulatory easing. However, it will take months to enact at the very least, and no one really knows what the end product will look like since the legislative process can be a messy endeavor even with a single party controlling the presidency, Congress and Senate.

GlobeSt.com: What's the upshot, as you see it?

Deermount: While potential home buyers (and builders, for that matter) may be optimistic about future economic growth and more access to credit, they have to deal with the conditions that we have today: interest rates that are rising far faster than incomes in expectation of future growth. That divergence between rates and financial conditions is why consumer sentiment for home buying is falling. Eventually, market conditions will either catch up with interest rates or rates will fall again to meet real economic growth. Either way, there is a disconnect right now.

NEWPORT BEACH, CA—Growth in real incomes after years of stagnation should be good for the housing market, but consumer sentiment toward housing is not improving, Landmark Capital Advisors' managing director Adam Deermount tells GlobeSt.com. We spoke with Deermount about the divergence he is noticing in the housing market and what it means for the industry.

GlobeSt.com: How do you view the current relationship between economic growth and household income.

Deermount: Generally speaking, it takes accelerating economic growth to spur growth in household income. After years of income stagnation, we are finally beginning to see growth in real incomes. This should be good for the housing market.

Home-builder sentiment is soaring in expectation of economic growth and market deregulation. Thus far, builders are largely discounting the impact of interest rates. This should be good for housing since all optimistic builders are likely to start more projects, which creates more jobs and eventually leads to a healthier economy.

Consumer sentiment is also strong—at its highest level since before the Great Recession.

Housing prices are going up. In fact, they have been rising for 53 straight months in the US. In the first three quarters of 2016 alone, homeowners added $837 billion in total equity.

A large group of Millennials is entering their mid-30s, a key age for household formation.

GlobeSt.com: So, what does this mean for the housing industry?

Deermount: Given the above, one might think that consumer sentiment toward housing would be on the rise as well. However, it's doing just the opposite as Diana Olick wrote for CNBC (emphasis mine):

“Consumer sentiment for home buying is falling despite the fact that more young Americans are employed and more Millennials are aging into their prime home-buying years.

“Why the wet blanket on home sentiment? It's twofold: A diminishing number of consumers expect the recent spike in mortgage rates to abate, and even fewer consumers say their household income is significantly higher today than it was a year ago, according to a monthly survey by Fannie Mae.

'Despite the post-election bump in general consumer attitudes, a rapid rise in mortgage-rate expectations has tamped down home-purchase sentiment, at least in the near term. A spike in economic optimism in the immediate aftermath of an election is typical. Whether consumers will sustain this level of optimism into 2017 remains unclear,' said Doug Duncan, senior vice president and chief economist at Fannie Mae.'”

GlobeSt.com: How do interest rates fit into the picture?

Deermount: Interest rates have risen substantially since early November in expectation of fiscal stimulus, tax cuts and easing conditions in the credit market. Taken on their own, rising interest rates are generally not good for the housing market since nearly everyone borrows money to buy a home, and higher mortgage rates reduce purchasing power. However, if incomes rise as well, they can (at least partially) offset the increase in cost.

But here's the rub: interest rates rise and fall based on future inflation expectations. And, while that move is already taking place, the aforementioned fiscal stimulus, tax cuts and reduction in bank regulations have not. This divergence actually began during the summer because rates increased from the Brexit low, but it seems to have picked up speed since the end of October when rates really began to move upward.

Given the current makeup of the federal government, it is likely we will have some level of fiscal stimulus, tax cuts and bank regulatory easing. However, it will take months to enact at the very least, and no one really knows what the end product will look like since the legislative process can be a messy endeavor even with a single party controlling the presidency, Congress and Senate.

GlobeSt.com: What's the upshot, as you see it?

Deermount: While potential home buyers (and builders, for that matter) may be optimistic about future economic growth and more access to credit, they have to deal with the conditions that we have today: interest rates that are rising far faster than incomes in expectation of future growth. That divergence between rates and financial conditions is why consumer sentiment for home buying is falling. Eventually, market conditions will either catch up with interest rates or rates will fall again to meet real economic growth. Either way, there is a disconnect right now.