TREMBLING TREASURIES RICK TOBIN
Near the official start of The Credit Crisis in August
When interest rates increase, then there are less
2007, the average 30 year fixed mortgage rate
qualified buyers who have sufficient income
hovered within the 6.5% to 6.6% rate ranges.
necessary to qualify for these proposed mortgage
During the same month of August 2007, the 10
payments. As a result, more lenders are beginning
Year Treasury Note Yield was near 4.86%. After
to offer adjustable rate mortgages with shorter fixed
asset prices began to implode such as stock and
rate durations so that more of their clients may
real estate values after the Summer of 2007, then
qualify for loans today.
the Fed reacted by trying to make rates much
lower in order to try to offset so much asset
With
the
double
digit
annual
home
price
deflation, which had also hurt Japan back in the
appreciation numbers in many parts of our nation
1990s.
over the past year or two, it can be more
challenging for some people to qualify for a
Our Last Year’s Treasuries and Mortgage
Pricing Trends
mortgage loan with a higher interest rate and
payment as well as for a home which may have
increased $50,000 to $100,000+ in price in recent
times.
Over the past year, the 10 Year Treasuries hit a
low of 1.55% (September 3, 2012), and 30 year
fixed mortgage rates reached near the low 3%
fixed rate ranges. In the week when I write this
article (early October 2013), 10 Year Treasuries
are somewhere closer to the 2.60 to 2.70%
ranges. Additionally, 30 year fixed mortgage rates
are closer to the 4.4% + rate ranges today.
I have read a few times in recent weeks that
upwards of 50% to 60% of all U.S. home buyers
have paid all cash in 2013. If these numbers are
fairly accurate, then many sellers seem to prefer
selling to all cash buyers as opposed to buyers who
need to qualify for a mortgage loan if they are both
willing to pay the same price for the property.
Will the Fed “Taper” QE Strategies?
Fed Chairman Ben Bernanke has now suggested
several times that the Federal Reserve may soon
“taper”
off
their
“Quantitative
Easing”
(QE)
strategies at some point in the “future.” Will it be
tomorrow, or possibly years or decades from now
depending upon the state of the U.S. economy?