Stop Blaming Mortgage Rates for Slumping Home Sales

Housing activity has frozen as the average 30-year mortgage rate climbed from 6.2 percent last October to 7.4 percent this month, but a rate of 7 percent is historically unremarkable and only looks high because the Fed spent years suppressing rates with quantitative easing. With long-term yields likely to stay elevated under $40 trillion in federal debt, a real adjustment must come from sellers, since homes will find buyers once prices fall far enough to make a 7 percent mortgage affordable.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

One hears a lot these days from real estate agents and other observers of real estate markets who are complaining that mortgage rates are too high, and therefore no one is buying. But if we take a closer look, we find that the problem is no more high interest rates than it is high prices. Moreover, we’re likely to find in the near future that it’s a lot easier to simply get sellers to lower prices than it is so get mortgage rates to come down to their ultra-low levels of a few years ago.

To understand this better, let’s begin with a look at 10-year Treasury bonds.