It took nearly 10 years for the spread to narrowJuly 15, 2002 |
 The
longer the stock market is under pressure, the more the Fed's hands are
tied in keeping short rates down. Over time, the only way for the the
spread to narrow is for long rates to come down. What is the implication
of 3 percent (or lower) long rates?Conventional wisdom suggests that lower mortgage rates make it more affordable to get into housing, thus boosting demand for real estate assets. But as long rates come down, is it reasonable to expect that all mortgage holders will be "gifted" with lower payments on their mortgage loans? Is there such a "free lunch?" Or do lower long-term rates mean a commensurate decline in long-term asset values such as real estate? The question: how can long-term rates come down without serious erosion on the value of long-rate sensitive assets such as real estate? What do you think? Send me your comments |