The Fed is going to stop buying bonds in October – that should give the national media some more fodder to kick around during the dog days of summer!
They will be suggesting that mortgage rates will be rising soon!
A few thoughts:
1. The last time the Fed halted their QE a couple of years ago, mortgage rates went DOWN, due to private investment picking up the slack.
2. Other factors have an effect on rates. A good example is today’s news about Portugal which sent our 10-year treasury yields to 6-week lows:
3. Wars and elections tend to keep rates down – and both are brewing.
What will it mean for real estate? Rates could certainly rise, and if they get close to 5% we can probably expect to pack it in until springtime. Buyers will appreciate the break, and sellers aren’t that motivated anyway.
If rates stay where they are today (or maybe drop a little?), we could see a vibrant 3rd quarter and buyers feel a press to get ‘er done before rates potentially go up. I don’t think rates will go up much if at all – the range has been pretty solid the last couple of months.
This is where I get my mortgage news:
http://www.mortgagenewsdaily.com/
Their ‘Daily Mortgage Rate Survey’ shows the zero-points rate, and yesterday’s was 4.18% – which is great. Let’s see where it goes!
What do you think will happen to rates?
I think we’ll see rates low for years, the only situation when the Fed will raise them is when they can no longer deny that inflation is just “noise.”
Interesting graph from calculated-risk on 10y Treasuries vs. 30y mortgage rates. If the 10 year gets close to 4%, you’re looking at 6% rates. 6% on the 10 year, 8% mortgage rates.
That would crush organic demand and the majority of the speculators (flip or rent). Not to mention the U.S. can’t afford to service our debt at that level.
You’re seeing first-timer buyers crowded out while rates are at the lowest they’ve been in what, decades? Prices would have to come down, significantly.
What will be interesting is what happens when the next recession arrives, as the Fed funds rate is already at zero. Statistically, we are due for one now. Big companies (Walmart) are coming out to say the Q1 GDP was a miss not because of the weather, but because the economy is weak.
July 30th will be a crucial date, when 2Q GDP estimates are released. I don’t think we’ll see the “rebound” pundits have been expecting.
http://www.calculatedriskblog.com/2014/01/mortgage-rates-compared-to-ten-year.html
When you look out at the economy today do you really see strength? Honestly I do not see a strong and vibrant economy. If we can turn back the clocks 22 years ago this summer to the 1992 campaign. Governor Bill Clinton, said it best to the voters, “It’s the economy, stupid”? This was so true then just like it is today.
Low interest rates are just one of many indicators of a slow economy not performing well. We are going need a much stronger and robust economy if we are going to push up interest rates in the coming years. Do you see that happening anytime soon? Interest rates will go sideways at best in my opinion, but I do not see big increases up or down over the next 12 months.