Interest Rates Impacting Real Estate – September 12 2015 – Issue 13

Ted’s Forecast by Fall 2016 (unchanged)

30-Year Residential Rates 5.2 to 5.6 Percent (6 percent is also feasible)
10-Year Treasury 3.46 Percent

After a few weeks hiatus this is the renewal of the weekly interest rate report. Since there was literally no change in rates nor new information, there was little reason to write a “More of the same” report.

For those that have signed up recently for this series, see my original blogs on interest rates as follows:

1st Segment on Interest Rates:

2nd Segment on Interest Rates:

Gold as a Predictor of Interest Rates:

Fed Stance on Rates at September Meeting:

Right now my forecast on rising rates is not looking too good (in the short run), but I stick with my forecast, which follows unchanged since May. No Place But Up.

While rates today are greater than the day this series commenced, the first graph shows the 10-year Constant Maturity Treasury Note. Once again belief is that the global flight to quality by international investors is seeing demand pick up and rates decline as global investors seek the safety of U.S. Treasuries. It may be a day, week or evens months when that reverses and rates elevate up. But when it does, rates are heading up. And they may do so rapidly. If the Fed raises rates in September – which is a 50-50 bet right now – the increase in rates may be sooner rather than later.

The first graph shows the 10-year Treasury Note weekly year-to-date.

The red star is the day of the start of this blog series in each of the three following charts.

9-13-15 graph1

The 30-year fixed-rate conventional mortgage rate from Freddie Mac’s weekly series is shown year-to-date in the following graph. This series is highly correlated to the 10-year Treasury Note.

The current 30-year residential rate now reported by Freddie Mac is at 3.90 percent. When expectations of a Fed rate increase are truly internalized, this level will be wishful level for homebuyers.

9-13-15 graph2

The following chart is the yield difference between 30-Year Fixed Rate Loans and 1-year Adjustable Rate Mortgages (ARMs) as reported weekly by Freddie Mac. 30-year rates are currently 127 basis points greater than 1-year ARMs.

9-13-15 graph3

I remain steadfast behind my prior forecast of 5.2 to 5.6 percent 30-year rates by the fall of 2016. If not sooner. At that time even a 6 percent level would not be a surprise. Catch your breath since rates are heading up soon. Probably at the September Fed meeting.

Rates are headed No Place But Up.

Forecast by Fall 2016
30-Year Residential Rates 5.2 to 5.6 Percent (6 percent is also feasible)
10-Year Treasury 3.46 Percent

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