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As Rates Fall, What Will Become Of US Housing?
If you want to argue that orthodoxy has it backwards when it comes to rates and US home prices, you have to make the case that the demand boost from a given decline in financing costs won't overwhelm any accompanying increase in supply from a loosening of the so-called "golden handcuffs" dynamic.
There are a number of vectors on which the persistence of high rates is arguably contributing to inflation in the US. The housing market's the quintessential example. Market rates remain far above the
Real housing costs will decline over the next 3-5 years. Don’t expect a quick fix though. 30 yr rates should be 5% if spreads were average. They are 6% now. If fed funds get to neutral, thats 200 lower, with a steepening curve, 30 yr
rates should be 4%.