If Ivy said it, it must be so! P.S. 10-yr bond yield down to 1.54%:
While Wall Street panics about falling rates, Main Street is benefiting, especially in the housing market, according to housing guru Ivy Zelman.
She says every quarter-point cut in mortgage rates is equivalent to a 3 percent drop in the price of a home.
“Right now housing prices are down for the consumer more than 10%, so it makes it much more affordable,” Zelman, told CNBC’s Diana Olick on Wednesday. “We are seeing very good activity, especially in the low end of the market.”
Zelman is known for predicting the 2005 housing peak and the 2012 housing bottom. She is the founder or Zelman & Associates, a research firm that surveys housing market experts for institutional investors and corporate executives.
Interest rates have been falling in the U.S. and abroad as worries about a trade war and a global slowdown cause investors to ditch riskier plays and buy into bonds, a historically safer trade. The yield on the benchmark 10-year Treasury note was at 1.623% on Wednesday, below the 2-year yield at 1.634%, causing a key yield curve inversion that sent markets tanking.
Although stock market investors are worried tumbling rates and an inverted yield curve mean recession, Zelman said home buyers are not as “laser focused” on market headlines.
When your down payment is skimmed off all that money you made in the stock market the last few years that is suddenly disappearing, sales start to drop at your megacorp tech or biotech employer and you start wondering about layoffs, you are not going to be excited about buying that new home. Maybe your existing home or your rental is the “safe” place to be to wait this out. Once that thinking takes hold, look out!
> She says every quarter-point cut in mortgage rates is equivalent to a 3 percent drop in the price of a home.
She’s right but we are talking about the difference between $3000/mo and $2910/mo. That’s not much incentive. Especially here where you max out your deductions.