Higher interest rates and the looming end of the second real estate double bubble

Author

Alex J. Pollock

Former Distinguished Senior Fellow, Finance, Insurance & Trade

This report was authored for Housing Finance International.

At this point, the most important thing about U.S. housing finance is that long-term interest rates are rising. The rate on 30-year fixed rate mortgages, the benchmark U.S. mortgage instrument, has since September 2017 gone from less than 4 percent to close to 5 percent. This is in line with the rise in 10-year U.S. Treasury note yields from something over 2 percent to more than 3 percent. The massive manipulation of long-term interest rates by the Federal Reserve is belatedly winding down, step by step. The house price inflation the Fed thereby promoted also must inevitably end.

Read the full report here.