European Markets Impact on US Housing?
This week mortgage interest rates have reached their lowest level this year as global investors poured money into U.S. government securities.
Proving how interrelated global economies are the seemingly nightly newscast depicting the European debt crisis has had a very real impact on our local housing market. The flight to quality and safety has led the yields on 10yr and 30yr Treasury bonds to their lowest levels of 2010. Mortgage interest rates tend track with the movements of the 10yr Treasury.
The FED’s mortgage backed security purchase program which ended in March helped bolster the housing market by artificially reducing rates. Economists expected mortgage rates to rise. The fact is rates started to increase until Greece’s economic downturn came to light.
Many prospective homeowners have felt the brunt of stricter underwriting guidelines and credit requirements imposed over the past three years. Some could argue in the short term this has slowed the recovery of the overall housing market. However, in light of stricter criteria a Mortgage Backed Security (MBS), once thought to be Toxic, now appears to be a SAFE investment. As they say, “all things relative.”
Long term this is fantastic news for the continued improvement in the housing market. I have advised family and friends looking to buy or refinance to do so sooner than later. China has already stated it is not curtailing its purchase of European debt and most believe their recovery is imminent. As Europe’s economies recover mortgage rates will increase.
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