SO, WHAT ARE THE SPECIFIC LONGER-TERM RISKS TO US AS REAL ESTATE INVESTORS?
1. Higher Long-Term Interest Rates (Part 1)
When the federal government floods the market with new debt, it creates excess supply in the treasury bond market. More supply typically means higher yields, and since mortgage rates are closely tied to treasury yields, expect upward pressure on long-term borrowing costs. Translation: real estate gets more expensive to finance.
TRANSLATION: REAL ESTATE GETS MORE EXPENSIVE TO FINANCE.
2. Higher Long-Term Interest Rates (Part 2)
There’s a second force that could push rates higher. Trillions in new spending and borrowing would likely lead to inflation. As inflation expectations rise, treasury yields rise with them (inflation and growth expectations are the primary driver of treasury yields). Again, higher yields equal higher mortgage rates.
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