Chuck Ponzi January 27th, 2006

Ok,

I didn’t say it, but an Escondido Bank CEO did. Here’s a link on some commentary that was supposed to be positive, but I think the last part kind of backfired. I’ll let you decide what you think.

Some listeners said that much of what they heard was nothing new, however, it did re-enforce some of their beliefs about California’s economy.”I think we can expect mortgage rates to rise, which will result in a slowdown in the housing market, which will cause unemployment,” said Larry Hartwig, president and chief executive officer of California Community Bank in Escondido.Which, he said, would be good in that the state would become less dependent on the construction industry.

Well, if a little unemployment would be good, I suppose a whole bunch of it would be even better! You know us Americans, we always like to supersize everything.

The better question is, if unemployment is required to reduce dependence on real estate, did you think the same about California’s dependence on aerospace and defense contracting in the 90’s? If so, that last housing price collapse was just the cure for that darned overreliance on a single industry, right?

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Chuck Ponzi January 27th, 2006

While reviewing some of the links that led users to my website, I came across something surprising even to myself.

A reader happened upon my site via Google by doing a search on the famous words of Alan Greenspan:
“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”

Take a look at the print-screen of the search!

Two things surprised me about this search and result.

First, who has time to really type out that entire quip? I hope they just copied and pasted it there, because that would really be a lot of typing for a Google search. Perhaps I have grown lazy in my days on the web…

Second, and most surprising to me was my ranking on the Google search. I ranked FOURTH on the list! Number one, by the way is Brad Delong’s blog, that I regularly read, and I suggest everyone to check out. Popular? yes! Number 4?

And, did anyone notice what number 5 was? THE ECONOMIST! That means that this little ‘ol blog ranked higher when quoting G-span! Now, if the financial markets were a conundrum, what is that? My blog being listed higher than one of the most well read scholarly-based economics periodicals is quite a surprise. Maybe it’s short-lived, but either way, makes you go “Huh?”

Feel free to see how this changes over the next little while by searching here using the same criteria.

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Chuck Ponzi January 27th, 2006

If you haven’t had a moment to checkout the new numbers on GDP that came out today, you really ought to take a look.

The LA Times ran an article today about titled State’s Housing Starts Fall for First Time in 10 Years. It gives an interesting, although fallacious argument to the concerns over housing starts falling.

In defence of the writer, he is just quoting some of the local housing experts, but it is pretty clear by reading between the lines that something else is going on.

Residential permits totaled 207,200 last year, the second-highest level in 16 years but 3% below 2004’s rate, the California Building Industry Assn. said. The trade group blamed the decline on strict regulations that limited construction.The trade group said housing production could drop by as much as 11% this year — potentially bad news for a California economy that has depended on construction as its leading job creator. A construction slowdown also could worsen the state’s housing shortage, said Alan Nevin, the association’s chief economist. He said California needed as many as 250,000 new housing units every year to meet potential demand.”Housing is definitely taking a breather,” Nevin said. He expects permits to fall to between 185,000 and 205,000 in 2006.By some estimates, more than 40% of all new jobs in California since 2001 were in construction or real estate-related fields.

In one of the hottest years for real estate PRICING, fewer homes were being built. This is most assuredly bad news for them. California has relied on construction to literally build them out of a recession. Without these jobs, the state’s economy will look much worse.

With all of the discussion of housing shortfalls over the past few years, I would expect to see far more people living in cardboard boxes than I have been seeing. How do we know that these numbers are real? Could they simply be serving to excite the public into the “buy now or forever priced out” mantra? They would never do that, would they?

Still, 2005 was the second time since 1989 that California’s housing production
exceeded 200,000 units.

Few homes means fewer real estate agents, fewer loan consultants, fewer builders staff as well. Construction won’t be the worst hit. It can and will happen everywhere else.

Nevin and members of his trade group contend that builders would gladly construct more homes if state and local zoning and building codes were less onerous. However, rising home prices may be starting to hamper the public’s ability to buy. The number of homes sold in Southern California was flat last year, the first year sales hadn’t increased since 1996, according to research firm DataQuick Information Systems. At the same time, home prices rose 16.5%.

I’m so glad that home builders are looking out for our best interests. Surely they would just as gladly lower prices so that more people can afford these homes, right?

Don’t worry too much about their ability to make money. When I looked at a house in SCV back in 2000, the original advertised prices for the homes were “Starting in the $190K’s” When visiting the sales office 2 months later to inquire about the first homes being built, the starting prices had been pasted over with a placard that read “Starting in the high $200’s”. I inquired and found that the lowest priced model was $275K. So, if the company figured they could make money selling at 190, I am certain that they were making an additional 40% by charging that much more. BTW, 2 years later, they were selling those same homes for $450K. Not a bad business to be in. Hardly being picked on.

Single-family housing construction, which accounts for the bulk of the state’s new housing activity, rose 2.2% statewide to 154,816. While most metropolitan regions showed gains, the biggest jumps were in the booming San Joaquin Valley.Back in 1995, the last time construction declined, the slowdown coincided with a housing market downturn that was caused in part by overbuilding of new homes.From 1992 to 1996, fewer than 100,000 homes a year went up across the state.

We should really start to question that need of 250K new houses. Is that really a need? How did they come to that number.

Another theory:

Population is most definitely growing in Southern California. The numbers do not lie. But, there is something more important that that. The housing density of households is likely increasing.

Yes, many of the state’s immigrants are ethnic minorities which historically have higher household density than the standard run-of-the-mill Californians.

Couple this with speculative buying by investors (up to 25% or more in past years) and it appears you have a housing shortage. We have no housing shortage (as the California Builders Association would love you to think) we have an affordable housing shortage. Thanks, in part, to the fear mongering you hear from the CBA.

In the end, the California Builders are serving their own best interests. However, overbuilding is overbuilding. Luckily for builders, unlike in the 90’s they are not left holding the speculative bag this time. Many builders learned through hard experience that spec-built homes are a dangerous way to do business and required pre-sales. In the end, they may fare much better this upcoming downturn than in the previous cycle.

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Chuck Ponzi January 25th, 2006

Recent traffic has been driven to the site by a great article in the OC register Morning Eye. You might want to check out the article in its entirety.

Besides mentioning this blog and others in Southern California, it gives some great viewpoints on blogging and how that is shaping real estate in the future. The point? In the past, information about real estate primarily came from those selling it.

The implication is that blogs give homebuyers neighborhood information that real estate brokers might withhold. That position is stated most forcefully by Alexis Palmer, operations head for Curbed.com, which covers New York, Los Angeles and, in part, Orange County.
“Normally, in real estate, most of the information available comes from those representing the sale of properties,” she says. “They have a different agenda than the consumer.”

This is spot-on and it’s definitely surprising to most of us that a local news outlet such as the OC Register is picking up on the sublteties.

Even without fact-checking, blogs tend to be accurate enough to help homebuyers, Palmer says. “You get robust corrections from the community of readers.”

True. Groups have been shown to out-estimate even professionals. This is why bond markets are generally good at determining risks. Even large groups of novices have been shown to be far superior to individual experts.

I personally enjoy LA Curbed, and recommend people check it out. It’s got some great commentary on local issues, and even some of their disdain about the area is warranted.

The Orange County coverage in LA Curbed, for example, is sparse and snooty. Friday’s post took a potshot at last week’s O.C. Register stories on rising home prices, particularly the tales of homebuyers “lucky enough to have bought a home in 1997, who have since watched their investments double, then triple to the point that their wealthiness disgusts us.”

If you live in Orange County and aren’t disgusted by the snooty demeanor of your neighbor’s frequent refinancings to afford the MBZ, BWW, or other expensive foreign autos, you are probably one of them. And, part of what many people outside the state are voicing their disdain for.

However, the writer says this about bubble blogs.

Other housing blogs aren’t interested in informing buyers, except about the possibility of a housing bubble.

OK, thanks for plugging the site, but I think we’re behind the curve if we’re still discussing “The possibility of a housing bubble”. If Robert Kiyosaki can see it and you can’t, you should probably get your head checked. The fact that we are on the precipice of the world’s largest housing bubble makes this site both relevant AND informative.

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Chuck Ponzi January 25th, 2006

Normally, I post mostly about what the talking heads are saying about the real estate bubble, but for a change, I would like to rehash a recent conversation I had about real estate in Orange County.

The conversator: A fellow colleague who moved to Orange County about a year ago (I’ll call him Jim)

The topic: You should buy a house, he says

How we came on the topic: How are things going?

First off, I haven’t approached anyone on the topic of a housing bubble in my personal life for going on about 6 months; I learned quickly that people don’t want to hear about anything negative; it’s better if they just experience it themselves rather than hearing about it from someone else.

Here’s approximately how the conversation went:

Jim: “You should really think about buying a house”

Me: “Really, you think I could afford one”

Jim: “Oh, yeah, anyone can afford one here in Orange County, besides, you’re a big time manager”

Me: “I don’t know, why now?”

Jim: “It’ll never be a better time than now. I bought about a year and a half ago and my house hasn’t appreciated a dime since then. My neighbor has listed his place for 6 months and it’s going for the same price as I bought in late summer 2004.” (note: he lives in Rancho Santa Margarita, a great family area)

Me: “Oh, well, if it hasn’t gone up a dime in over a year and your neighbor is desperate, why should I buy?”

Jim: “Real estate never goes down here”

Me: “Really, that’s not what I heard about the mid 90’s”

Jim: “What?”

Me: “Yeah, I heard once that prices went down like 20 or 30% in the mid 90’s”

Jim: “No… that can’t be” (Cognitive Dissonance sets in)

Me: “Suit yourself. Besides, it’s a lot cheaper to rent for me”

Jim: (Pause, reflecting, then longingly) “Yeah, renting would be pretty great right now”

Me: “Really, you think so? Why?”

Jim: “I hate yard work. Besides my place is too small for my family and my monthly payment is killing me.”

Me: “At least it won’t go up.”

Jim: “Well, that’s the thing. The only way I could afford after I sold my place in Indiana was to get an Interest Only ARM with nothing down. It’s going to go up in about another year.”

Me: “Yeah, but your house will be worth more by then, right?”

Jim: “I don’t know. I guess so, but what if it doesn’t?” (He starts sounding panicked, so I’m trying to relax him)

Me: “Well don’t lose sleep over it, ok?”

Jim: “I had better talk to my wife.”

Me: “Yeah, go see what she has to say, but don’t worry too much, you’ll give yourself a heart attack.”

OK. So the conversation was probably a little pedestrian, and rambling, but you should have heard his panic when I mentioned that I “I heard once” that prices went down. His denial was quickly overcome with fear (and I wasn’t even putting the pressure on).

I have a feeling that things won’t end so well for Jim if he needs a bigger place anytime soon. (BTW, he moved out of a 3500 sq ft house in Indiana into a 1700 sq ft place in RSM and he has 3 kids).

I have a feeling that future discussions at the watercooler around the area will not much longer be about how much housing went up lately. Even if it just shifts to another topic, I for one, will welcome the change to something like sports, weather, or anything that does not have to do with the cost of housing. I enjoy enough from blogging, and I hope you do too.

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Chuck Ponzi January 24th, 2006

If anyone has ever had more of an underlying influence on the mania of real estate in the US, one could argue that man would be Robert Kiyosaki, the author of Rich Dad Poor Dad.

Many now doubt whether much of anything in the book is really true. Was he a millionaire? Why did he go bankrupt? Did he even go bankrupt? After you read the book, I recommend reading John T. Reed’s analysis of him and the book. It will give you another impression of what is truly going on with Mr. Kiyosaki.

I have read the book cover to cover several times. While it makes a good read, I wouldn’t rely on it for financial advice. Much of his advice is steeped in doublespeak, he contradicts himself numerous times, and even offers quite a bit of advice that is ILLEGAL or TAX EVASION. I would not recommend anyone trying what he claims he has tried. I also doubt that he has done half of the stuff he says he has in his book.

But, you have to admit that he is a lucky marketer, and has made a bundle of money off of telling people that they can be rich if they take risks. However, he fails to mention that many people end up poor because of risks. That the last 30 years of risk-taking has been actually very rewarding does not mean that it will stay the same for the next 30. And, quite possibly, we could see a slow deflationary period due to globalization.

Robert Kiyosaki has been a cheerleader for the real estate industry, by promoting the fallacies of real estate investing. This is exactly why I was quite surprised when I saw an article from him titled Smart Investing Amidst Real Estate Mania.

I wasn’t shocked enough until I read some of the contents.

We all know a real estate crash coming. The problem is we don’t know when.

One of the problems that I have with him after putting my finger on it is that he is quite good at making people feel good about themselves, and develops a cult of personality. I like making people feel good about themselves, but not at the expense of rational thought.

I estimate that 90% of all investors invest for price movement, not value. If prices begin to escalate, as they did in real estate from 2000 to 2004, amateurs turn pro and begin buying real estate to flip — for example, buying a home for $200,000 and then selling it for $250,000 a few months later. Most stock market investors do the same thing. In investor language, flipping is known as “the greater fool theory of investing” — you’re buying something not to own, but in the hope of selling it to someone who’s a greater fool than you.

OK, he has mixed up his terms here. The thought that “most investors invest for price movement, not value” is probably one of the worst overgeneralizations he could make. He might as well say that the stock market has no value, only percieved value. Not true, unless you don’t understand that stock certificates is actual ownership in the company: ownership of profits after interest and taxes.

He also draws some really bad inferences; he’s essentially undereducated. Perhaps if you followed the NASDAQ’s rise and fall, you might agree with the greater fool theory, but there is most certainly some intrinsic value to stocks. Value investing is when a person buys because the price falls below that intrinsic value. Speculation is what happens when buy above that intrinsic value in the hopes that it goes even higher (this is the greater fool theory), or essentially that no matter how high you pay for something, there will always be someone out there even more disconnected from the intrinsic value who will buy it. Strong belief in the greater fool theory is the source of manias. It is psychological, not systemic.

Take some more of his advice.

Although a crash is the best time to buy, the market’s high pessimism also makes it a tough time to do so. I remember buying gold at $275 an ounce in the late 1990s. Although I knew it was a great value at that price, the so-called experts were calling gold a “dog” and advised that everyone should be in high-tech and dot-com stocks. Today, with gold above $500 an ounce, those same experts are now recommending gold as a percentage of a well-diversified portfolio. Talk about expensive advice.

If by “tough” he means “easy”, then he may be right. When would it be “tough” to buy gold? Maybe when the US government says it is illegal to hold it, perhaps? If he means psychologically tough, we might agree, but that means that you’re a momentum investor, that you jump on the bandwagon as it’s leaving the gates. And, that “great investment” he’s referring to of gold? I’ll admit, it returned just over 10% during that time. But, that followed on nearly 25 years of deflation from $800 per ounce. At what point do you call a bottom? There’s a name on Wall Street for an investor who buys at the bottom and sells at the top “LIAR”.

But, at least we can agree on one thing:

So the lesson is: Now, more than ever, it’s important to focus on value, not price. When prices are low, finding value is easy. When prices are high, value is a lot harder to find — which means you need to be smarter, more cautious, and resist your knee-jerk reactions. A final word from Warren Buffett: “It’s only when the tide goes out that you learn who’s been swimming naked.” In my opinion, there are many naked swimmers, especially in the real estate market.

We will find out just how many naked swimmers there are in real estate in the next few years. And, I’m happy to see that Mr. Kiyosaki has “called the top”, even if he’s just jumping on the bandwagon.

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Chuck Ponzi January 19th, 2006

Every once in a while, we come across a new theory about the Southern California Real Estate market that is not widespread in its beliefs or has not yet caught momentum.

It’s always good to review others’ blogs to grab the cutting edge; sometimes comments are the most telling of all; those who have a flash of insight and care to write it down sometimes stumble upon something.

As I was reading a post that MISH over at Global Economic Analysis made the other day about the dramatic Centex One Day Sales events, my interest was piqued by a writers’ comments. You can find the original link here.

Right now, there are a lot of bubble watchers who want to get in during a so-called “correction” phase. These guys have cash on the side and they fundamentally believe that it’s a good thing to be a homeowner whereas the really astute individual realizes that a home is just that, a place to rest one’s body than an asset class like precious metals, AAA bonds, blue chip equities, etc.During the soft market of 2006/2007, a lot of these people will be getting into properties, discounted at 15-20%, thinking that they’d beaten the system. Afterwards, the overall volume of buyers will disappear and these individuals will also be stuck in properties that they, themselves, can’t sell if their company relocates or they loose their jobs.That’s when we’ll see a crash, ala 40-60%, down from 2000/2001 prices and the end of real estate as an asset class. It’ll revert back to a depreciating asset, much like a used car but with a steadier bottom of 30-40% of original list price up until the economy
starts to produce real jobs and then real estate can go back to being an inflation hedge but that’s perhaps another 12 to 15 years away.

Should we agree with his assessment?

Well, let’s rethink this a little bit. We can read a few assumptions into the mind of the writer.

First, his assumption is that there are a lot of people waiting on the sidelines with lots of cash ready to buy at current prices.

How much credence should we lend this theory? While we don’t have any statistics available for us to determine if any of this is true, this makes this a weak argument. While homeownership rates are at their highest they have ever been, and with taxes fairly substantial, many people are already homeowners. In fact, much of the premise of a housing bubble is built on the belief that it was predicated on the easy lending policies in the credit markets. It would be a hard sell that there are MORE people waiting on the sidelines that simply decided not to buy than already bought more than they could handle. You would also have to assume that builders will not try to build their way out of declining profits and slashing prices (Centex proves they will do just that)

Second, another assumption that he makes is that homeownership is primarily a lifestyle choice.

While I am certain that some individuals feel this way out of necessity, I would argue that there is a very strong and very real societal bias towards homeownership. Exclusion from certain groups, fear of being viewed as financially insecure, and fear of missing out has pushed record groups to buy homes. In addition, most would find that homebuying is related to I would say that this is not as likely.

Third, he assumes that purchase decisions will be nearly instananeous, and therefore the near-term future is difficult to predict. If homeowners fear prices are going back up, they will just buy immediately.

I would have to disagree if this is an assumption. RE transactions are notoriously slow and fraught with incompletions. I’m not seeing this one.

Because of the illiquid nature of the market and sticky prices, it would seem that we should expect a slow descent for a year or so with increasing momentum to the downside for several more after that. Perhaps the writer would attribute that to bubble sitters getting back in, but I’m inclined to believe that no one will wait out the entire pop to buy. Since it could easily take 6 or more years to fully deflate, a 28 y.o. could be 34 or older by the time they would be buying back in. That’s a lot of time to be sitting out of the market while their wife nags about it. While some would have that patience, it’s not likely that many of us are of the same mindset.

We will have to wait and see what will come of the next few years, but it seems pretty likely that 2006 will be a slightly down year from ‘05 prices, and ‘07 will quicken the pace.

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Chuck Ponzi January 19th, 2006

The focus of this post is information that has recently come out of of Dataquick Information Systems. We all know that for a long time that Dataquick has the most comprehensive and extensive set of information about the Southern California region’s real estate transactions. I always enjoy a good sound bite from John Karevoll. Both he and his organization are often expounding on the information they have; attempting to point a clear direction for the Southland’s real estate sector.

We all know that sales here are off dramatically from a year ago, and that the pace is still high historically. However, a few cracks are beginning to appear in all areas of our real estate - centric economy.

They have chronicled the mess of affordability in L.A. that currently stands at 11%, and have provided insight into where the market is going in the short term. But, real estate moves at a glacial pace. Saying where real estate is going to be when you have the most comprehensive data anywhere is just laying out the data in a plot, and drawing a trendline; it’s not rocket science. Can they predict long term trends though?

An article released on their website yesterday titled Southland home sales down, lower appreciation is telling in more ways than one.

Pay close attention to the turn from real estate cheerleader to warning sounder they have made in this article.

A decline from November to December is normal for the season. Last month’s sales
count was the lowest for any December since 24,913 homes were sold in December 2001. The Inland Empire bucked the regional trend and posted sales increases last month, led in part by record-breaking sales of newly-built homes. “The frenzied part of this real estate cycle is behind us and what we’re seeing so far is a normalizing of the market. Mid-market and entry-level homes are selling well, the move-up and prestige markets are leveling off. It’ll be interesting to see how this plays out between now and spring, ” said Marshall Prentice, DataQuick president.

It’s interesting that he thinks the frenzied part is behind us. Personally, I would say that the euphoric part is behind us and the nail-biting, gut wrenching part is just about to start.

However, this is where they make the full 180 from previous stances:

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,255 last month, up from $2,238 for the previous month, and up from $1,869 for December a year ago. Adjusted for inflation, current payments are about 2.6 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.

OK, so now they are talking about real estate cycles, right? It seems hardly that you cannot read an article about real estate these days here in SoCal without the late 80’s to early 90’s being mentioned. This is because it is all repeating, but in a much more dramatic fashion than last time. And, anyone with memories of California older than 15 years knows what the downside is like.

Easing down or not, the fundamental shift in real estate over the past months has not been the prices or volumes, it has been insider sentiment. It’s not hard to see the turncoats turn.

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Chuck Ponzi January 18th, 2006

The guys over at San Diego Union Tribune pulled out a great little piece titled “Hot housing prices begin to cool off” about how prices are virtually screaming down from heights reached earlier this year.

While noone wants to be an alarmist about what has happened, a bit of concern must be racing through homeowners’ minds about what is going to happen. Luckily for thier concience and ability to sleep at night, they have the SDUT. Unfortunately for their pocketbook, the SDUT will likely lull them into a sense of complacency while others are running for the door.

In the piece there are a few gems:

San Diego County’s sizzling housing market fizzled last year, when prices climbed only a third as fast as they did in 2004 – the largest year-over-year drop in appreciation on record. The overall median price last year was $494,000, up 7.6 percent from 2004, when prices soared 21.1 percent during one of the hottest local real estate periods ever.

The writer makes it clear that the wave has crested. The next comment is just as telling about comparable situations in the Southland.

The last time DataQuick Information Systems reported a similarly dramatic shift was in 1990, when prices rose 3.7 percent, compared to a 16.6 percent rise the year before. That milestone heralded the beginning of a seven-year real estate recession.

I would agree wholeheartedly that it slows down before it drops. So, does this slowdown point to a drop? To borrow a saying I learned growing up in Iowa: Does a bear poop in the woods? (Note: Disclaimer; I have no ideas where bears poop, there were no bears as I was growing up in the midwest , and I have never personally met a bear other than in the San Diego Zoo)

However, I take a bit of comparison to stock waves and trading curves in liquid markets. Unlike a stock market move, volume DECREASES substantially on the downside of the curve. This causes a some of the stickiness in prices since information is poor and sales volume is insufficient to justify an all-at-once jump down, nor will sellers accept large drops in sales prices seeking to maximize benefit.

How does he comfort fears?

Economic conditions today, however, are far different from the early ’90s when job layoffs, bank failures and a sharp economic downturn soured the local housing market. Jolly said San Diego has experienced up-and-down real estate cycles, but he did not think the area is poised for a bust.

What he is saying is that the economy is fine, not like last time, so don’t worry, your house won’t go down in value.

I thought I would test a hypothesis. They mentioned 1990 as the year the increase dropped dramatically, so I pulled some of the unemployment numbers from that time period from the BLS. Here’s a great little graph that their website offers.

Does it surprise anyone that the increase in unemployment did not begin until after 1990? I tried to find statistics from before 1990, but the BLS does not have them readily available.

In fact, from the graph, the last 2 business fluctuations can be seen. The early 90’s mild recession and the 2001-2003 soft patch.

So, if unemployment rises at the same time that housing prices go down (by their own admission), there is very little to predict about housing prices unless you hold the key to also predicting unemployment statistics. BTW, if you have this ability, I seriously suggest you make a call to the FED board, Bernanke will need you to smooth the upcoming recession.

All of this simply reinforces the point that San Diego has crested and is on its way down (at least according to the SDUT).

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Chuck Ponzi January 17th, 2006

The US Treasury announced that they will be offering 30 year bonds for the first time in 5 years.

You might ask, what does this have to do with real estate in Southern California. Maybe more than you think.

Normal investors that have a 30 year investmen plan should really be seeking a higher rate of return than the measly 4.5% that they are likely to generate. Where would demand for such a product come from?

In a group: pension plans, annuities plans, and insurance companies. Perhaps even foreign governments?

These are some of the largest buyers of asset-backed securities. If demand for 10 year bonds weakened in favor of 30 year bonds, we could very well see markedly higher interest rates for mortgages.

How, you ask? Well, many mortgages are aggregated and packaged as 10-year bond offerings on the MBS (Mortgage Backed Securities) market. They typically have a 10 year maturity because the average mortgage tends to be redeemed at that point, not 30 years. So, the reduced demand on MBS’s could rais interest rates noticeably.

Some people might be asking at this point, “Is this for real, or just another hoax?” Well, it worked the same way in reverse. When the 30 year was discontinued, demand for the 10 year jumped substantially and they yields (along with mortgage rates) went in the crapper.

Since mortgage rates are already on the rise because of inflation and the potential weakness of the dollar from Euro strength and Yuan appreciation, you could be seeing some big changes in mortgage rates over the next year.

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