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Chandan Economics president Sam Chandan weighs in on the mortgage and real estate market.
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-- show a drop.
For pending home sales and speaking of a drop we've been focused on this today the ten year treasury yield look at it now 164.
Mean.
Sixty year low or whatever disenchanted is here.
On low interest rates and low home sales and blow everything but to deceive -- morning what do you make of that first of all before we talk about just housing which is your specialty.
We thought -- -- how much lower can interest rates really go but look at the tenure today this kind of -- it's not a vote of confidence -- US fiscal policy particularly as we approach the fiscal cliff later on this here but what it does reflect is that in the global market there's incredible instability.
And most about right now it was centered around two things one is an incredible level of dysfunction in Europe.
With regard to what's happening with Greece certainly but more importantly now with Spain and the potential for contagion -- -- so -- of -- everybody -- their money here in the long term consequences of that potentially -- what do you -- well I think right now what we see is that it's helping people to access money at very low rates provided that they -- able to qualify right so when we look at the US residential mortgage -- the thirty year commitment -- right now is about three point 8%.
It is historically low because of Fannie and Freddy's the -- special relationship to the government there's a very very tight.
Core relation between that treasury rate at how much it cost people to borrow we don't see a big jump.
By any stretch and in home sales no not at all and this is a key distinction for us to remember what we're looking at those mortgage rates there are two things one is that.
Even the mortgage rate is at a historic low that doesn't mean the people are able to actually borrow -- look at the data on how difficult it is to qualify for a mortgage.
What you see is that there -- a lot of people particularly those young homebuyers who are not able to get a mortgage and take advantage of that low rates so there's a disconnect there what happens then it now and that's happy in this market with rates at record lows.
What happens when at some point.
Rates go up again.
Well I think that you know with a rates at this level we should be seeing a lot more buyers out there.
But what we see the -- -- metrics data which give up this morning at seven point 7% annualized rate of increase.
In about rental rates which people are paying in rent for their so that's -- -- -- the -- really where people are going.
The challenge forces that if this is the number of homes that we can sell when rates are this slow -- as rates mortgage rates begin to rise.
We really have to worry about the sustainability of any of the gains that we have right now.
As the rates -- -- if it's because the economy's getting a lot stronger in the treasury rates are going up as a result people have jobs.
That's one thing.
Because might also implied that the standards for getting the -- you start -- -- so we -- -- written some -- for higher interest rates well it depends on the reason it's because of the US economy is getting a lot stronger and so inflationary pressures are ticking up and those are driving up the rates.
That's all right if it's -- -- ultimately.
People start to get a little bit more nervous about you where we're going if we don't hand manage that fiscal -- as well as we should.
And so there's some reticence about you invest now further treasuries that's another thing altogether another item for later in the -- they fiscal cliff Sam thank you.
