Interest Rates and the Middle East

[Doug Smith]

I know that for some of you this will be elementary, but many on BP are not in finance. If you would have asked me a week ago (after hearing Chairman Powell's most recent comments) I would have bet that rates would continue to rise through 2024. Of course, we did not expect what happened in the Middle East. This post is not about the horrors that are happening now in the Middle East, but are simply meant to start a discussion about the economic impact that it will have on real estate and rates here in the US. When war breaks out, the world tends to turn to the US for financial stability. We're seeing people buy US Treasuries driving down the price and, therefore, driving down rates...at least for now. If you are not someone that is in tune with how mortgage rates work, I highly recommend keeping an eye on the 10-Year US Treasury. That will show you the direction of mortgage rates. I look forward to hearing more input and comments on this subject. (the level section from Monday was when there was no trading for Monday's holiday)

[Trevor Richardson]

I anticipate I’ll hear investor clients pausing buying activity for the next couple weeks, to see the direction of markets. 

However the underlying issue of lack of supply and high demand for housing (the US is still several million units short) won’t be changed by conflicts abroad or even here. It’s essentially a US infrastructure issue that’s here to stay. I remind our investors to continue to analyze deals. Interest rates certainly have an impact on deals. If rates start to go down, buyer activity and deal flow and prices will pick up. 

[Carlos Ptriawan]

Quote from @Doug Smith:

I know that for some of you this will be elementary, but many on BP are not in finance. If you would have asked me a week ago (after hearing Chairman Powell's most recent comments) I would have bet that rates would continue to rise through 2024. Of course, we did not expect what happened in the Middle East. This post is not about the horrors that are happening now in the Middle East, but are simply meant to start a discussion about the economic impact that it will have on real estate and rates here in the US. When war breaks out, the world tends to turn to the US for financial stability. We're seeing people buy US Treasuries driving down the price and, therefore, driving down rates...at least for now. If you are not someone that is in tune with how mortgage rates work, I highly recommend keeping an eye on the 10-Year US Treasury. That will show you the direction of mortgage rates. I look forward to hearing more input and comments on this subject. (the level section from Monday was when there was no trading for Monday's holiday)

 At the time of war, traditionally Bond is shooting up because the market tend to think the treasury is the traditional safest asset class, hence yield goes down including the rates. In fact it's going down until Thursday when CPI is becoming hot again.

thursday noon when 30Y Auction is executed, the respond is muted ! and yield actually increase.
Also Friday the MOVE (bond volatility) and VIX is spiking up (although so far it seems result of money is being moved from Tech to utility sector). 

Meant to say we're not out of the woods yet and there're still too many conflicting narratives. The failed 30Y auction on thursday is worrying IMO as it related to Yield forecasting.

I also have similar thinking like you that this middle east thing would lower mortgage rate in the long run.

[Chris Seveney]

@Doug Smith

The way inflation continues to be stubborn I don’t think we are going to see a significant enough drop in interest rates (below 5.5%) for a longer period of time.

[Carlos Ptriawan]

Quote from @Chris Seveney:

@Doug Smith

The way inflation continues to be stubborn I don’t think we are going to see a significant enough drop in interest rates (below 5.5%) for a longer period of time.

 I am bit disagree , if we make CPI doesn’t include owner equivalent rent, CpI is already in 2 percent.

this bogus owner equivalent rent that causes the data seems to be bigger , in other word Fed is screwed up in their own methodology to count inflation