To conclude our discussion on mortgage rates, house prices & epiphenomena, let’s consider the Fed’s role, or lack of one, in the housing market.
The 1st Gulf War and its effect on oil prices is a good parallel to mistaking mortgage rates for house prices. While connected, they aren’t the same thing!
Real estate is its own market, subject to its own forces of supply and demand. Thinking that interest rates are the only factor driving prices is too reductive!
High mortgage rates don’t necessarily lead to lower house prices because high rates themselves are indicative of a bull market in housing! Here’s why.
A quick check of the correlation between home prices and 30y mortgage rates shows that it constantly changes. Simply put, homes aren’t 30y bonds. Here’s why.
30y mortgage rates in the US have risen sharply to ~4%, giving rise to concern that home values will fall. Are these claims and concerns valid?
The Evergrande contagion has begun to affect China’s largest developer. This could mark the point at which the contagion embarks on its next phase.
Evergrande has finally formally defaulted. While not a surprise to markets, it did cause a plunge in the CNY; which isn’t a good sign for the rest of the world.