The yield on the 10 Year Treasury Bond rose today to the highest level since George W. Bush was president. While mortgage rates aren’t actually tied to the 10 Year Treasury Bond, they do tend to rise in tandem.
I don’t know what the implications of this will be. I doubt it will result in an increase in real estate sales. I suspect it will result in a higher proportion of cash sales and further concentration of wealth.
Title should be 10 years instead of !0.
Housing (7%) is only one implication there are many others.
Cars (6.3%), corporate financing, new student loans (5.5%), government financing — all are being effected by this.
Another subtlety; the yield curve is really inverted, the 6 month treasury is at 5.5%. The length and depth of inversion has rarely been seen (comparable to 1929, 1973, 1979). I’m not predicting anything like that, but the treasury market is behaving like it rarely does.
One consequence is that much of the loan portfolios of most or all banks must be seriously depreciated. We’ve already seen three large banks fail when this current rate rise began. There must be many more failed banks that have so far escaped detection.
There is also the issue that the effort of BRICS+ to bypass the dollar in trade settlements might succeed. Then what?
I note the trade war between the US and China is heating. Our restrictions on chip sales to China have been met by Chinese restrictions on the export of gallium and germanium. Our leaders can’t seem to think ahead more than one step.
Also, the Biden family corruption scandals seem to be getting traction. How another failed Presidency affect the stock and bond markets?
Considering the rate was much higher during the 1980’s and 1990’s, I’m not sure we should be too concerned.
“I suspect it will result in a higher proportion of cash sales and further concentration of wealth.â€
That’s called hitting a nail on the head. People like me have been cash buyers for a number of years, only taking out a mortgage when the money is free. (I have a 2% mortgage. Good lord.).
First time buyers are crowded out or forced down market. Moderate income buyers as well. And, importantly, institutional investors are snapping up properties. Talk about concentrating wealth.
Lastly, think about how much of the economy is driven by this activity. new home sales are up because of scarcity. But they are a minor fraction of activity. Existing home sales have plummeted. I don’t know the ‘right†amount of housing GDP, but I know it will be less than it has been. Maybe it will be replaced by all those green jobs…..(snicker)