“Steve, didn’t you say that – once mortgage rates fall to X% – house prices would soar? Aren’t we there now?”
A friend that reads my newsletter asked me those questions over the weekend at a party.
I was actually speechless… because I didn’t remember writing about a specific interest-rate level that would cause a house-price boom.
While I don’t remember saying a specific level, I do believe we are there, now.
[ad#Google Adsense 336×280-IA]Mortgage rates are incredibly low now – and there’s a great chance they could stay low for years.
If this happens, then house prices can soar.
Don’t take my word for it on interest rates – take the world’s foremost expert on them.
Take The Bond King’s word for it…
Last month, Bill Gross (The Bond King) said that the interest rate on 10-year government bonds belongs in the 2.5%-3% range “now and for the next few years.”
If Bill Gross is right, then mortgage rates in the next few years will stay near record-low levels.
With house prices in most of America still in the “affordable” range, and with near-record-low mortgage rates, you have plenty of upside potential in house prices in America.
What kind of mortgage rates are we talking about here?
We should be looking at mortgage rates of between 4% and 4.5%. Here’s why:
Mortgage rates are typically about 1.5 percentage points above the 10-year government bond rate. If The Bond King is right about interest rates being between 2.5% and 3% “for the next few years,” then mortgage rates should stay roughly in the 4%-4.5% range.
Low interest rates and high affordability are the main reasons that house prices could soar. We have plenty of other reasons, too…
Another big reason folks are about to buy real estate is because they don’t know what else to do with their money – they’re earning zero percent in the bank and they’re afraid of the stock market.
We also have a basic math problem that should push home prices higher as well – builders haven’t built enough homes to meet demand. When there’s more demand than supply, prices go higher.
Yes, house prices have gone up in recent years. But with near-record low rates, high affordability, low supply, and nothing else to do with your money, house prices have a huge amount of upside potential from here, in my opinion.
Please, don’t tell yourself that you’re too late… or that you’ve already missed it.
You haven’t.
There’s still plenty of upside left in U.S. housing prices… If you can, take advantage of it!
Good investing,
Steve
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Source: Daily Wealth