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pinkflamingo
5 years ago

Nice graphs. thanks Rich!
Nice graphs. thanks Rich!

XBoxBoy
5 years ago

Thanks for adding the
Thanks for adding the mortgage rate chart with this post. For the last couple of years I’ve been thinking the market is on pretty solid footing, but the way a less than 1% increase in mortgage rates slowed the market in late 2018 leads me to wonder if the market isn’t more fragile than I think. Does it seem to others that the market is more sensitive to interest rates than it used to be?

gzz
gzz
5 years ago

Unemployment hits 3.6%, 49.5
Unemployment hits 3.6%, 49.5 year low:
https://mobile.reuters.com/article/idUSKCN1S9075

More jobs, more economic growth, higher rents, higher real estate prices.

Are mortgage rates actually low or do they have room to fall?

Adjusted for inflation 30 years are about 2-2.5%.

There are lots of different means US rates could converge toward.

One is relative to other countries. Currently US 10 year is higher than Israel, Canada, Cyprus, New Zealand, Australia, Ireland, and Spain. That’s basically unprecedented. So is our rates being MUCH higher than France, Netherlands, and Belgium.

I am not so much arguing for lower rates as saying there is equal uncertainty in both directions, and high nominal rates in the 1980s and 1990s are pretty irrelevant to the coming 2020s.

In general, if you want a positive return after inflation, plus currency stability, and the legal stability and protections of a developed Western system, the USA, Canada, and Australia are your only bets. Japan, South Korea, Taiwan, and Europe are zero growth and have shrinking labor forces. BRICs have a lot of unique risks. Net capital flows I believe will favor the USA more and more, push our rates toward developed world means, not our current rates which are akin to developing nations like Thailand and Morocco.

XBoxBoy
5 years ago
Reply to  gzz

gzz wrote: More jobs, more
[quote=gzz] More jobs, more economic growth, higher rents, higher real estate prices.
[/quote]

I don’t think you can in all fairness make this blanket statement. While we have seen more jobs and economic growth, we haven’t seen much increase in wages, which means higher rents and higher real estate prices are not a foregone conclusion. Higher rents and real estate prices might still happen (due to limited supply or lower interest rates) but it isn’t a clear logical step as you imply.

The rest of your post I don’t disagree with and you raise some great questions.

spdrun
5 years ago
Reply to  XBoxBoy

Labor force size has
Labor force size has decreased by 740,000 people since December of 2018, when it peaked in size. It’s been steadily decreasing for four months, in fact. 3.6% doesn’t look as good as you’d think considering this fact.

phaster
5 years ago
Reply to  spdrun

spdrun wrote:Labor force size
[quote=spdrun]Labor force size has decreased by 740,000 people since December of 2018, when it peaked in size. It’s been steadily decreasing for four months, in fact. 3.6% doesn’t look as good as you’d think considering this fact.[/quote]

ever considering bigger picture of the “Civilian labor force participation rate” which is down over decades,…

https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm

combined w/ other stuff like the fact that don’t think the fed understands the euro-dollar funny business (i.e. “credit” created outside the USA pumps $$$ into the global system),… make me wonder how much longer the market(s) can stay irrational,… things could stay rosy for those w/ access to capital for awhile longer, but eventually the tab has to be reconciled