I remember years back, in the middle of the real estate boom, when the US Treasury 10 year bond yield went to 3.08% and interest rates cracked 6% (5.875% for a 30 year fixed loan), someone said to me that they KNEW that the bond couldn't go any lower and was shorting Treasuries. Indeed, at that point the bond went back up to the mid 4's, interest rates went up and real estate kept booming. This morning, the bond is at 1.85%, rates have cracked 4% (3.75% for a 30 year fixed in some cases) and we are faced with predicting where we will be six to twelve months from now.
Clearly, the real estate market of today is vastly different from that of 2005. No longer are people able to finance 106% of the purchase price of their homes with no income verification and terrible credit. Is this a bad thing? Obviously not. While mortgages are harder to procure, the liklihood of default is greatly diminished.
My prediction is this: Real estate will continue to grow at historical (not including the real estate boom) levels. Rates will continue at current lows well into 2012. Two factors to watch are jobs and Europe. Once the job market begins to improve, rates will inch up. Watch those job numbers. Once Europe straightens itself out, rates will also rise. Neither of those will change dramatically tomorrow, however.
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