This weekend marks the unofficial start of the spring home-buying season. The combination of low-interest rates and overall good economic data out of the U.S. supports the belief that home sales and home-related activities will be robust. With the Fed staying on hold for the moment, and, with the odds favoring a rate reduction, the cost of financing debt is very attractive.
One concern remains home affordability. How far borrowers are willing to stretch may hurt higher end coastal markets. However, the demand for a luxury home product is strong (Jeff Bezos just purchased a $165 million home here in Los Angeles).
The 30-year Treasury auction this week was met with strong demand even with the offering being consummated with the lowest yield ever offered. With $13 trillion negative rates globally, the U.S. bond market is one of the few places where high-quality bonds change hands with positive yields. This phenomenon will cap how high-interest rates can go up in the U.S. With the 10-year near 1.500%, locking in at these levels is prudent, but interest rates may go lower. The uncertainty of the coronavirus could push rates higher or lower depending on how the virus spreads.