I raised this topic with another real estate broker last weekend, and she agreed. In fact she said she had been thinking this for a long time. That means there are at least two of us. I know, I know. It sounds crazy. But from where we are–at artificially low levels–somewhat higher rates will not slow expansion. My contention is that higher interest rates will improve the risk-reward profile for lenders. Currently they are borrowing at just above zero and taking back mortgages at 3%-4.5%. Even I could make money with that spread. However…would I chance it?
Mortgages used to be considered one of the safer types of loans. The collapse of housing, where low-down, low-interest loans were made in a landscape of higher and higher prices, has changed that profile. Lenders and their investors who provide the liquidity for purchase-money mortgages are not being rewarded for making those loans. Even if they borrow the liquidity at near-zero rates.
I know at least one person agrees with me. It is currently a contrarian viewpoint. Can housing take off without higher rates? Maybe. But employment will have to increase dramatically. We need lots of new jobs to be created–and soon. Some areas of the country are experiencing better sales volumes than the national trend. That could be an early indicator. If we are to return to more normal volume patterns in real estate, we’ll need more normal levels of everything, including interest rates. Won’t you join me in calling for higher rates? Let the drumbeat begin.
