Will we be able to stay out of the financial dog house? Maybe, but only if 10 year yields can stay below 4.5%! Why 4.5%? If you look at the chart below, the RE market took off right around the time the yields dropped below 4.5% in late 2002. Subsequently, the RE market topped when yields broke over 4.5% and stayed there till now. I believe that recent rate cuts and market instability will have the indirect effect of easing pressure on the Real Estate market. As the flight to safety accelerates and the rate cuts work their way into the market, yields will probably continue to drop.
The reason I say this is that the rumor of another rate cut and a slow economy will make bonds more attractive and put pressure on yields to the downside.Â In turn, this will lower borrowing costs for qualified buyers to refinance their mortgages, attract new buyers, burn off the inventory, and adversely raise inflation (this is bad).
Thanks to Helicopter Ben, we're starting the party up again.
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