by Calculated Risk on 2/18/2025 12:24:00 PM

Today, in the Calculated Risk Real Estate Newsletter: The "Neutral" Rate and Implications for 30-year Mortgage Rates

A brief excerpt:

Housing economist Tom Lawler has written extensively on the neutral rate. He has argued that the neutral rate has increased back to pre-financial crisis levels and that it seems like that “the current stance of monetary policy is not meaningfully restrictive”.

Analysts are catching up. This morning, economists at BofA wrote: “The most reasonable interpretation of the data flow seems to be that the neutral rate has increased a lot more than previously thought, and policy might not be restrictive at all.”
...
In normal times, the 30-year mortgage rate is typically 175 to 200 bp above the 10-year yield. Here is a graph of the relationship between 30-year mortgage rates and the 10-year yield since 1971.

The red dots are the for the period Jan 2022 until today. This shows that the spread increased with the inverted yield curve.

There is much more in the article.

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