SD,

I agree. When I was looking at the house in Sunset Cliffs a month ago the 10 yr was at 4.62%. This morning it touched 5.23%. That is a substantial increase in a months time. I feel some sellers who have some equity will start to get nervous in the coming months, and pull their chips off the table. This fall should be interesting. The struggle between sellers and buyers will turn in the buyers favor if rates continue to inch upward, and the momentum could accelerate this bear market faster than anticipated.
Everyone can afford a certain payment, and rates always affect price.

Darn you pre-empted my comment. It won’t affect affordability one whit, if prices come down enough to compensate for the rise in interest rates.

Josh

Very good point SD Realtor.

Here’s an article about bond yields affecting the market.
http://news.yahoo.com/s/ap/20070608/ap_on_bi_ge/10_year_yield_9

I do however think that the million dollar club will be affected as well but with a little bit longer lag. Many business people, especially, the nouveaux riches, who bought in the last 5 years have Interest Only loans or Option ARMs. Business people are the type who generally think why leave millions in my house when I can leverage that money in my business? Actually, the exotic loans were designed for such people (not for middle-class salaried buyers). Businesses depend on easy money. Without it, you’ll see some major retrenchment.

I think that the majority of adults don’t remember a high interest rate environment and won’t know how to deal with it. I once met a British woman who told me she missed Thatcher, the “good old days of 15% from her savings account.” For elderly people with assets and no debt, high interest rates is an ideal environment.

It wont hurt those of us with cash. Put the 10 year at 10% already.

Is it time to buy into a 10-year bond bear instrument(DXKSX, for instance)?

It wasn’t all that long ago that people were salivating over the prospects of a mortgage with an interest rate below 10%. It is not beyond the realm of reason to think that those rates couldn’t go back above 8% within the next couple years.

The thing to remember is that in addition to the cost of money at the “wholesale rate”, all the retailers of credit will have to factor in higher profit margins on their end, too. Instead of 2% above prime it could go back to 4% above prime.

The maximum (conventional fixed/30yr) loan a $3,000/month mortgage payment will support at a 6% interest rate is about $500,000; the maximum amount at 8% is about $410,000. That doesn’t include property taxes or insurance. So yeah, higher interest rates can and will affect pricing trends in those markets that are dependent on employment wages for debt service.