Mortgage Rates Lower Even With Talks Of Higher Taxes & Growing Fears Of Inflation
The U.S. economy appears to be on good footing. Corporate earnings are easily beating expectations. For the moment the bond market is calm even as many companies state their intentions of raising prices due to rising input costs. Bond yields have fallen back down to the 1.50% range which was helping high beta growth stocks rise. The one big spook to the market this week came by way of a Bloomberg report announcing major tax hikes on capital gains for the highest-earning Americans. While that caused a sharp sell-off Thursday, equity markets bounced back Friday. It is too soon to really know how this tax increase will play out, but should it pass the Senate, it seems reasonable that it will be a negative for risk-taking which includes buying stocks and more speculative investments.
With so much liquidity sloshing around and so little yield, money is flowing into equities, crypto, and real estate. Bitcoin fell hard this week which speaks to this new digital money’s volatility and why it is still hard to understand how one can transact with a currency that moves around so much day today. Should Bitcoin go down dramatically, I imagine it will hurt other parts of the investment market given the bullish nature of so many on this investment.
Regarding real estate, housing remains on a tear although rising prices and lack of supply are of concern. Banks continue to compete with each other, especially for wealthier clients and with the return of many products in the non-QM space, most borrowers are being approved for home loans, even those borrowers with trickier income or lower credit scores. However, lenders are requiring skin in the game (anywhere from 10% to 20% on jumbo loans, and at least 10% for better-priced government loans), which is keeping borrowers honest and prices from soaring higher.
