Will Interest Rates Go Higher?
Will Interest Rates Go Higher is one of the most pressing questions in real estate circles. Everyone from buyers and sellers to banks and brokers are looking for detailed info to provide the answer. In a presentation to our company, National Association of Realtors Chief Economist, Lawrence Yun provided a series of graphs and explanations to provide some real estate data and info.
Mr. Yun provided 19 different graphs in as part of his presentation. The first of those is below. He began with an explanation of how mortgage rate resistance points are markers of the direction and stability of interest rates. And, how understanding where the resistance points are, can help see where interest rates may move or stabilize.
In this graph of interest rates, you can see "plateaus" which is where the resistance point ranges are. These help forecasters recognize the limits and ranges of an interest rate move. Webster defines resistance point as
a point at which a trend meets with opposing or nullifying forces; especially the point(s) in a market that stabilizes or reverses a trend.
In the example below, the horizontal red lines indicate the resistance points. Those red horizontal lines are the "resistance points" for downward rate movement since 1990. It has been shown that rates don't move through a resistance point because of a number of factors that create resistance to further rate movement - for a time.
However, once the interest rate moves through an "established" resistance point, rates will generally keep moving until it the next one is encountered. At that encounter, it is hoped that there is sufficient stability and economic influence to stall and stabilize further change.
Currently, rates have moved up through the lowest resistance point. Mr. Yun said rates "blew through the first resistance point". Rates are still volatile however, and if the economy is influenced as expected, Mr. Yun sees the possibility that rates could blow through the next resistance point, too - although he'd prefer them to level off for awhile.
November economic influencers will be the elections, the FED interpretation of the US economy, and the FED decision about how to positively influence the US economy. The short answer to the question "Will Interest Rates Go Higher?" is that the data will not show up instantly. It will take some attention to detail over time. As in the graphed example, the resistance points are groups of months and not a specific day.
So start gathering you data set and start plotting. When you see a leveling off, rates may have reached a new resistance point. My understanding is that resistance points are based on the past data and cannot actually be forecast.
Will Interest Rates Go Higher? It depends on the strength of the economic factors surrounding the resistance points when new interest rates encounter each resistance point.
Best wishes, Heath
The next slide in Lawrence Yun's presentation was a comparison of "10 Treasury Yields and 30-Year Mortgage Rates".