Pippa is loving SoCal. We had a great walk this morning to the dog park. I take her off-leash any moment I can, and she loves it. Here are a few shots on our way there.
Can you spot her in the last photo? đŸ™‚
Although the trail to the dog park is only a half mile or so, it reminded me again of how much I love and long for the woods.
Interest rates have been on my mind lately. Apparently they’re on a lot of people’s minds… I’ve been getting cold emails from past lenders I’ve worked with that are hawking refinances.
I’ve been bearish interest rates for a long time. When we purchased our current primary residence about 2.5 years ago I managed to convince Kaitlin (notoriously risk averse) that we should finance it on an adjustable rate mortgage (ARM).
That’s a scary phrase for normal people, because a) they don’t fully understand them, and b) they’ve been led to believe ARMs were the cause of the financial crisis.
But here’s the monthly chart of the 10-year T-Note (this is what mortgage rates are generally based on plus a premium):
As you can see, it’s been a pretty predictable drop since the early 1980’s. The second vertical pink line is where we locked our current 7/1 ARM at 3.00%. Lenders aren’t quite able to beat that yet. But that will change.
I believe we’re going to see rates continue lower. Once we break current support in the 10-year T-Note in the 1.30% – 1.40% area, we’re going to be seriously talking about negative interest rates in the States.
Not convinced rates will continue to go lower or negative? Check out this visual of the 700-year decline in interest rates. Pretty amazing.
Right now, six countries have interest rates at 0% or lower.
I honestly have no clue what the macro implications will be. Nobody does. But what was once touted as a short-term solution now seems to be the norm.
No doubt it will be a boon for property owners as the cost of financing homes continues to decline. Retirees will be increasingly forced to chase yield outside of savings accounts, CDs, and bonds, pushing asset values to even higher extremes.
When the reckoning comes is anyone’s guess, but it’s bound to. Personally Kaitlin and I are pretty darn leveraged, taking full advantage of cheap money. But I’m aware that it’s a game of musical chairs, and listening carefully for signs the music is about to stop.