Talking heads discussing the impact of higher rates – one being more ARMs:
The guest commentator said that we will lose 20% of the buyers if rates go over 5%, which sounded like a guess. We don’t have to lose any buyers if they were just willing to look at smaller homes or a cheaper area. It’s the buyer psychology and ego that will cause people to drop out.
people have been spoiled. rates < 7% are reasonable.
There’s a reason markets are pricing in worst-case scenarios, and it has to do with the Federal Reserve’s messaging as well as monetary policy, PIMCO CEO Mohamed El-Erian said Tuesday.
“The longer they stay unconventional, the deeper they venture with these experimental policies, the more the costs and the risks start to become large relative to the benefits,” he said. “There’s a second really interesting issue, which is, are they giving us too much guidance?”
“When you give so much guidance to the market, you risk over-determining,” he said. “So what happens, people jump to the terminal values. They don’t even wait for the journey. They go immediately to the destination, and the re-price, and then the bad technicals kick in.”
El-Erian also said that he still saw value in bonds, depending on the viewpoint.
http://video.cnbc.com/gallery/?video=3000178495