I’ve got to hand it to the majority of pundits out there. They just never learn to think for themselves. They keep dishing out the same nonsense, over and over again.
For instance, the notions that rising interest rates will kill off equity market gains, particularly in the U.S. … or choke off a real estate recovery … or kill the gold market for good — are myths. Period.
It might be true if interest rates were at record highs and well above the rate of inflation. But they are not. Interest rates are coming off of historic record lows in many parts of the world — even below zero in some countries — and they are far below the rate of inflation.
That’s important to understand. As rates rise from essentially 5,000-year-low levels — no matter what any central bank does — many investors will run for cover. But the only market that rising interest rates will truly hurt is the value of sovereign bonds. In other words, it will demolish governments’ ability to ever borrow again (a good thing).
Consider what’s happening right now with real estate. Why would rising mortgage rates — at this point in the economic cycle and recovery — be bad for property prices?
They won’t be bad. For the simple reason that as mortgage rates start to rise, all the pent-up demand for property will come out of the woodwork and start buying — in anticipation of further increases in the cost of borrowed funds.
That’s precisely what is happening in the U.S., in particular, where a housing recovery is well underway.
Consider the latest data from brokerage Douglas Elliman Real Estate, where January 2017 was an excellent month for high-end sales in Connecticut and where sales from $1 million all the way up to $5 million increased significantly compared to January 2016.
Overall, total inventory is down to 447 houses which is 13 lower than last year at this time, while total sales are up 16.