Amy Bender Webb
For the 30-year fixed rate mortgage, costs are going up, and that is now in the cards, in part, because of a policy decision that Fannie and Freddie will pull back, start raising their fees. There are simply slight increases in disparity, 30-year-fix over ten-year treasuries, which they usually track quite closely. So we've hit 5%. Five percent is, of course, historically, very low. But if we go up another hundred bases points, and we could, that would have significant impact over and above a 5% slide.
And then of course we've got a potential disequilibrium condition again because right now, 25% of home borrowers, mortgage holders, are under water. If we had 10% plus down, we would have 50% of borrowers under water, which triggers all sorts of potential strategic default issues. So where we are, it's on the bottom. It's not destabilized. We're not in a vicious cycle as we were a year ago. But potentially, we're there again, and then of course, that feeds into the rest of the economy -- no growth in construction, either in the residential sector or construction jobs, and that slows down the overall recovery, which again, feeds back to the housing. But the greatest concern is on the interest rate front.
Great article, with a lot on the housing market, interest rates and the cost of borrowing.
