I encourage you to read the above linked article written by Bill Gross. Page 3 references a Fed study dated September 2005.
The yield on the 10 year treasury may have peaked. Friday’s 4.99% yield broke the 5% support level. However, don’t count on lower long term rates to save housing. (Especially in areas such as SoCal that are now, as a result of the recent run up, dependent on the short end of the yield curve.
Notice the chart in the article on the history of 10 year rates back to 1988. It appears that the peak of the 10 year was in 1989 – right before the end of the Fed’s tightening campaign. I don’t think I have to remind anybody as to what happened in 1989 with respect to the housing market in SoCal.
Also notice that rates dropped considerably over the next years. Didn’t help housing one bit!
Reversion to the mean is real. Not even interest rates will help in this case.
