Something I’m pondering this weekend: What’s next with this surge in 30-year mortgage rates?
30-YEAR MORTGAGE RATE & 10-YEAR TREASURY YIELD
8/25/2023
Source: Koyfin, Wall Street Journal
So far, the biggest impact on residential real estate has been a freefall in the number of homes for sale. (Why sell when you’ve had the good fortune of locking in a 3% mortgage, right?)
Historically, mortgages have cost around 1.75% more than the benchmark 10-year Treasury note. Today, that spread is around 3.00%. That’s huge and likely not going to last. Something’s going to give—or break.
Will it be home prices, interest rates, the economy—all the above? Maybe it will be the Fed’s ability to deliver low and steady inflation going forward (along with its credibility).
Either way, this seems unsustainable. Otherwise, we should jump in and collect those juicy mortgage yields.
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