10YR Surges: Mortgage Rates Next?
A: The 10YR bond yield has been making higher lows and now higher highs for the past 10 days or so, which should hit the mortgage market next week. In fact, I would expect lending rates to already have popped a bit on the latest jobs report. Here is some info you need to know if you are active right now in Manhattan real estate as well as some worthwhile takes from the blogosphere.
For Buyers IN CONTRACT - Did you lock in your rate yet? If not, call your mortgage broker RIGHT NOW and lock that baby in. Chances are if you were waiting for next week or the week after, rates will be higher.
For Serious Buyers on the Hunt - Adjust your affordability range taking into account likely higher mortgage rates! As lending rates rise affordability goes down especially if you already are stretching your budget looking at property's above your max.
For Sellers Who Must Sell - Higher rates as we get past Memorial day is just not a good combo for those sellers who MUST sell soon! If you are financially struggling and must sell because you can't afford your home, lower your price NOW and have your broker up marketing efforts to encourage buyers before it slows down. If rates rise 1/4 point or more, buyers will certainly have less incentive to chase purchase prices.
Here is the 5-Day chart via Yahoo Finance showing the jump in yield from 4.62% to 4.756% today:
Get educated on what is going on that affects affordability in the housing market! Lending rates, jobs, stock market wealth effect, and high salary's all affect affordability for buyers. So, when rates look like they are going to rise, your buying or selling strategy might need to be adjusted or else you will be left without a chair when the music stops!
Here are some statements worth reading from the blogosphere on macro economic issues.
Via The Big Picture -
Its time to admit that "the notion of price stability requires a broader definition. Various indices, house price inflation and the cost of rents and mortgages should all form part of a judgment about price stability." Failing to do that risk the ire of the public. They increasingly lack belief in the government statistics in general, and there may develop a decreasing faith in Central Bank's credibility in particular.Via Nouriel Roubini's RGE Monitor -To paraphrase Munchau, if we are to judge inflation on a broader scale, we would undoubtedly come to the conclusion that like the rest of the world, the US has an inflation problem.
Today's figures on housing starts and building permits show that the housing recession is worsening.Via Brandeis Professor Steve Cecchetti on Macroblog -Other data from the housing market are no better; they all point to a worsening housing recession. Moreover, there is strong evidence that the massive credit crunch in the subprime mortgage market is now spilling over to other near prime and prime mortgages and also more broadly to some non-housing components of consumer credit.
My favorite indicator of the medium-term inflation trend, owner equivalent rent (OER), continued to moderate, rising a mere 2.1 percent (a.r.) for the month -- well below it's recent readings that have been in excess of 4 percent. Regular readers of this update may recall last year when I was warning that rises in OER would eventually push core inflation over 3 percent. Well, that hasn't happened and I have a theory about where I went wrong. At the time, my logic went like this: Over the past 5 years, resale prices of houses have risen far faster than rents, opening up a significant gap between the two. My sense was that house prices were likely to languish, perhaps even fall modestly, so that the lion's share of the gap would be closed by a step-up in the rise of rents. What I failed to see was that the combination of a high inventory of unsold new homes, combined with increased mortgage defaults could flood the rental market. It is the glut of rental houses that is holding OER down now and is likely to continue to do so in the foreseeable future. The result will be falling CPI inflation.Love that last one. Recall my previous post on 'Inflation & Condo Conversions To Rentals: A Good Combo' where I stated:
"Time will tell but the conversion of unsold condos to rentals seems inevitable and should help ease inflation down the road, reverse the trend of rising rental costs, and contribute to easing the high levels of unsold inventory."
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