When Will Mortgage Rates Get Over 4%

Logan Mohtashami from Housing Wire is one of my favorite economists to read weekly and this last week he wrote an article titled, “When will mortgage rates get over 4%?” Logan believes that for days on market and home price growth to cool we need mortgage rates over 3.75% and this would be a good long-term signal for housing. Logan has often described the national real estate market this year as the unhealthiest housing market ever because of how fast home prices have increased.

Why 3.75%? Because he believes the 10-Year Treasury Bill yield needs to hit 1.94% too and there is about a 1.75% rate difference between the 10-Year T-Bill and mortgage rates. Why 1.94%? That is when we experienced an inverted bond yield curve in 2019.

I also looked back at my 10-Year Treasury Bill charts and here is what I see—the 0% Fibonacci Retracement Level is at 1.97% last seen in December 2019. And 0% Fibonacci Retracement Levels are rarely ever crossed. Thus, it will be very difficult for the 10-Year T-Bill yield to cross this level. Thus, rates will remain at or below 3.75% I believe.

Logan also reminds us of these facts—
· The yield on the 10-Year T-Bill has been dropping for 10 years and this trend line is nearly impossible to break for very long.
· After QE1 ended, bond yields fell
· After QE2 ended, bond yields fell
· After QE3 ended, bond yields fell
· Now yields did rise a little bit as each round of QE was happening.

Thus, mortgage rates over 4% for even a couple of months looks very unlikely. And unfortunately, months of inventory and days in market will remain too low and home prices will rise too fast.