That Was Fast: 30-Year Fixed Mortgage Rate Spikes to 6.18%, 10-Year Treasury Yield to 3.43%. Home Sellers Face New Reality

Abstract

Aside from the sheer magnitude of the spike, this was also the highest mortgage rate since collection of the daily data began in April 2009. The 10-year Treasury yield spiked by 28 basis points today, to 3.43% at the close, a huge move, and the highest since April 2011: But wait Back in the day, before QE and interest rate repression, 6% mortgages were considered low, I mean super-low, and I thought I got a great deal with my 15-year mortgage in 1989 at 8%! There are folks here that remember 15% mortgage rates. The Greenspan Fed ginned up the idea to cut interest rates following the dotcom bust to create a housing bubble in order to take over from the imploded stock market bubble. Well, not really cracking down, just slowly raising short term policy rates from near 0% to still very low levels, and ending QE finally, and slowly starting QT. So that's not really a crackdown, but seeing how massively markets have reacted to this little bitty policy action shows just how overinflated all assets have become, thanks to 12 years of QE and interest rate repression - 12 years of Fed policy errors - and how hard it will be to unwind all this craziness back to some normalcy. After 12 years of money printing and interest rate repression, home prices have ballooned to the point where higher mortgage rates have a very different impact than they had back in the day. Each time mortgage rates rise just a little at current prices, they take a new layer of potential buyers out of the market. So it cannot happen here, they say, but it's already happening, even in May before the current spike in mortgage rates, as inventories jumped in amid price reductions and sagging sales, because there is one way for sellers to nail down a deal: Cut the price enough to where the next buyers can afford the mortgage.