Only One Way for Rates to Go
Americans have assumed the roller coaster goes one way, legendary bond manager Bill Gross told The Times this weekend. It’s been a great thrill as rates descended, but now we face an extended climb. While rising interest rates will reverberate throughout the economy, they are likely to have a particularly noticeable impact on the housing…
Americans have assumed the roller coaster goes one way, legendary bond manager Bill Gross told The Times this weekend. It’s been a great thrill as rates descended, but now we face an extended climb. While rising interest rates will reverberate throughout the economy, they are likely to have a particularly noticeable impact on the housing market. With rates on 30-year fixed mortgages currently in the mid-5-percent range, every percentage point rise can increase the cost of carrying a home by 19 percent, according to a Columbia prof. Whether there ends up being a proportionate decline in home values remains to be seen, but it’ll certainly add another headwind for the housing market just as some regions have started to see some stabilizing. The only good news for those with existing fixed-rate mortgages is that, to the extent that higher rates correlate with a rise in inflation, real interest rates on your mortgage could fall.
Consumers Face the End of an Era of Cheap Credit [NY Times]
Graphic from The New York Times
Did someone mention house prices?
Yet I suspect you own nothing to take advantage of that prediction, BHO.
Like TBT, TYO and TMV
DIBS is dreaming. We’ll certainly have 7.5%+ rates.
Price = 10 x annual rent.
***Bid half off peak comps***
“Whether there ends up being a proportionate decline in home values remains to be seen…”
No longer remains. I see it.
Patient home shoppers will not be paying for rate hikes. They’ll wait for the inevitable effect of lower prices. Sellers will pay for it by lowering their prices. The longer it takes (while the market falls and shoppers keep saving), the better. More money down on a cheaper house.
***Bid half off peak comps***
note to self:
free financial advice from self-proclaimed experts is probably worth less than par value.
“In today’s Journal, we take a peek at foreclosures of the rich and famous.
One of our findings was that people who bought some of the most expensive homes in America now are far more likely to be behind on their mortgages than are ordinary Joes–though the ordinary Joes aren’t doing very well either in that department.”
http://tinyurl.com/y8yb8l5
What would be considered a rate calamity for 30 year fixed? 7? 7.5?
The cessatiioon of the fed ending MBS purchases was one of the most telegraphed moves in monetary history. Private lenders have been chomping at the bit to step in and have.
Rates are already up .25% since the cessation of the Fed’s MBS purchase program. We’ll see how that ends up over time.