A decade of easy money got people drunk with easy gains.
A whopping eight Fed interest rate increases this past year have created a quick sobering up that’s leaving investors and consumers woozy.
We saw crypto exchanges implode last year.
In just the past week, we witnessed the 2nd and 3rd largest bank failures in US history. The government scrambled to block any contagion.
To quell inflation, the Fed wanted to raise rates until things broke. Things broke. Expect more banks to fail soon.
Mid-March’s inflation reading came in at a still-too-high 6%.
If the Fed raises rates, banks break. If they don’t, inflation could run roughshod over America.
Fed Chair Jerome Powell’s life is becoming more complicated than a Christmas with divorced parents. Interestingly, they’ll announce their next rate decision on March 22nd.
Until then, over-analyzers might try to monitor Powell’s sleeping patterns. Goldman Sachs now expects no rate increase.
The captain has turned on the seatbelt sign, because the stock, bond, and crypto markets will keep responding turbulently.
You and I have a smoother flight itinerary.
That’s because real estate prices and rents barely feel the bumps. But mortgage rates do—they’re correlated with bonds.
Bond investing is about as exciting sitting in middle seat 36B. Just looking at the word “bond” makes me want to take a nap.
But explaining their importance to real estate investors is easier than explaining TikTok to my grandparents.
Just like real estate, the cheaper you buy, the higher your percent return.
When there’s heightened uncertainty like this, it pushes investors into the safety of bonds. That demand pushes up bond prices.
Bond prices and yields have an inverse relationship. Higher bond prices mean lower bond yields. Mortgage rates track bond yields.
That’s why spooked investors who rushed into bonds made their yields fall off a cliff this past week. It took 30-year mortgage rates with them, tumbling from 7.05% to 6.55%.
Here’s the perspective you won’t get from CNBC…
Bank failures won’t faze you like they do Wall Street investors. We build wealth by strategically borrowing money from banks, not parking it inside banks.
WHEN’S THE CRASH?
You heard it on this week’s podcast: When’s the Housing Crash?
In the video below, you’ll learn more because you get to watch us show you charts, graphs, and maps about: plummeting sales volume, the future direction of home prices and interest rates, delinquencies and foreclosures, and lots more.
Housing intelligence analyst Rick Sharga joins me for our 2023-2024 Housing Forecast discussion. Grab a nice drink and settle in:
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