Why Buyers Should Care About the Bond Market

For the first time in over five years, short-term interest rates have risen above long-term rates.  Why should you care?  Well, at the risk of causing your eyes to glaze over, this trend means that the resulting "inverted yield curve" could boost monthly payments on adjustable-rate mortgages (ARMs).

If this curve remains inverted, then a couple of things are likely to happen.  Demand for ARMs will soften and, more importantly, some borrowers would have difficulty obtaining this type of financing to make their property purchase.

The knock-on effect is that homes could sit on the market longer (though the bond market is by no means the only factor contributing to such a scenario) and sellers need to work carefully with their REALTORS to set sales prices accurately during this period of transition.