6.08.2007

Interest rates and the housing market

If you're not a daily follower of the financial markets, you might have missed the big move in the bond market yesterday. What's it mean if you're not a bondholder? Answer: housing doom.

The higher yields on Treasury bonds will mean higher mortage rates. This will be devastating to anyone with ARM resets coming up. And it also means higher rates, and lower affordability, for new buyers. The traditional 30-year fixed is moving to 6.5% - 7%. That means hundreds of dollars more each month in interest for a typical home.

If you're selling a house, cut the price now to move it. If you're buying, wait six months or a year for prices to reflect the new rate environment.

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