How Us Debt Payments could keep Mortgage rates low for 2022.

Going into 2022, really, going into any year, I get asked what I believe about the future of housing in the Lehigh Valley! I will write a series concentrating on local and macro factors that concern the area starting here with interest rates.

This quote from Stanley Drunkenmiller from May makes it difficult for me to believe rates will go up fast --

He projects that if yields on the ten-year Treasury rise to the projected level of 4.9%, the government would be spending close to 30% of GDP each year simply paying back interest expense (compared to 2% last year) unless it monetizes the debt, which experts think is unlikely and Druckenmiller believes would have “horrible implications” for the U.S. dollar.

To see the full interview. CNBC Video

Or Read: Forbes

I like this train of thought because some of the data derives from the congressional budget office, so it accounts for some of the interviewee's bias. I believe the takeaway: due to U.S. Debt, quick interest rate advancement to historical norms, will be too prohibitive for U.S. debt service to suddenly disrupt the housing market. There will be no Volker-esque stoppage to the housing market like in the 80's.

My prediction, this all means rates do not increase so fast it tangibly manifests to cause a hypothetical 20%+ decrease in demand in 2022. Our next post will discuss mortgages if the treasury was at 4.9%. At the time of this his post, the ten year treasury is at 1.4%.