A different way to say the same thing is that fixed rate mortages, along with bonds, track inflation expectations and the opportunity cost of the same investment.
Since everything looks bad right now, the opportunity cost of bonds is low. Since inflation is (reportedly) low, bonds are cheap.
Yep. When bonds edge higher….lets face it, they aint goin much lower…..30 year fixed will edge higher. Ever stricter lending standards will glue more fence sitters to the fence. The current glut of bank owned inventory continues to grow every month. In March 300ish sold and 1000ish added….looking at NODs this number will only grow and grow and grow.
The math isnt far off from banks owning 1 full year of inventory (15k homes) on top of private sales. Sure, they dont own it yet….but we’re looking at adding 700+ homes to bank owned inventory every month, and that number is accelerating. If banks add 1500 homes/mo, interest rates rise, and sales fall by another 15-20%….presto. Heck, it doesnt even have to make it to 1 year of inventory…as Gary would say 6 months is ‘in the bag’.
This first 20% drop has been fun to watch……if the perfect storm hits in the form of job loss + higher interest rates coupled with the inevitable bank owned real estate…..wowsa!!! buckle up…..
