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Speaker 1: Inflation is cooling and interest rate hikes are slowing down,

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Speaker 1: and yet regardless of where you are in the world,

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Speaker 1: you're probably spending more and more money on renting or

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Speaker 1: owning your home. Home Ownership has long been a traditional

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Speaker 1: path for building wealth, but as prices skyrocket, that avenue

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Speaker 1: for financial security is becoming less accessible to people across

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Speaker 1: the globe. Bloomberg's Ari Altstetter and Kara Wetzel report that

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Speaker 1: if you bought or refinanced the house in the last

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Speaker 1: few years, chances are you're going to be paying that

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Speaker 1: high interest rate on your mortgage for years to come

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Speaker 1: with no relief insight.

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Speaker 2: The pain from higher interest rates is cumulative. It gets

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Speaker 2: harder the longer you have to bear them. Someone, let's say,

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Speaker 2: with a varial great mortgage, who saw their payments or

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Speaker 2: their interest rate go from two and a half to

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Speaker 2: three percent up to seven percent, may think I can

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Speaker 2: bear that seven percent for a few months. But the

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Speaker 2: longer you get past that few months, the harder it gets.

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Speaker 3: The impact of what we're seeing is that homeowners who

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Speaker 3: have already locked in low rates are sitting on those

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Speaker 3: and are essentially not moving. So our supply has gone

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Speaker 3: way down, and that has led to people who are

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Speaker 3: entering the market to confront still high prices.

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Speaker 1: I'm Craig Gordon today on the Big Take. The global

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Speaker 1: housing market faces a cold reality, Kara. Interest rate hikes

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Speaker 1: and inflation have both slowed around the world, but despite that,

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Speaker 1: borrowing costs are still higher than they have been in

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Speaker 1: recent years. Why is that.

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Speaker 3: Well, as central banks began really raising rates aggressively last

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Speaker 3: year and rapidly they sent interest rates much higher, the

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Speaker 3: bond yields have been soaring in most of the world,

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Speaker 3: and particularly in the US. Tenure treasuries of which a

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Speaker 3: lot of borrowing costs are based on, and particularly mortgage

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Speaker 3: rates are very sensitive to those have gone to this

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Speaker 3: highest level in many, many years, and as such, mortgage

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Speaker 3: rates have followed, and inflation is slowing, and central banks,

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Speaker 3: including the FED in the US, have paused their campaigns

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Speaker 3: to stop their rate hikes.

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Speaker 4: But the thing is, when central.

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Speaker 3: Banks stop the rate hikes, that doesn't necessarily mean that

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Speaker 3: the rates go down.

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Speaker 4: They stay where they are.

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Speaker 3: So we have had mortgage rates that have soared to

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Speaker 3: the highest level in a generation, and they're going to

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Speaker 3: basically stay there unless there is some major event. That

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Speaker 3: causes central banks to come in and actually lower rates.

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Speaker 3: And the prospect though that they are going to lower

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Speaker 3: rates to where they were for you know, much of

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Speaker 3: the past fifteen years since the financial crisis is pretty low.

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Speaker 3: So rates and particularly borrowing costs for houses are going

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Speaker 3: to stay elevated as far as we can tell, pretty

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Speaker 3: well into the future.

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Speaker 1: So ari, how have the increased borrowing costs affected the

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Speaker 1: prices and the supply of available homes.

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Speaker 2: The impact on prices has been interesting. Borrowing costs are

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Speaker 2: a driver of demand. Higher borrowing costs should equal less demand,

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Speaker 2: and so that has in a lot of countries like Canada,

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Speaker 2: New Zealand the UK, resulted in a decline in prices.

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Speaker 2: The thing is, it hasn't resulted in nearly as big

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Speaker 2: a decline in prices as you would expect as central

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Speaker 2: banks even expected relative to the rise in interest rates.

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Speaker 2: And the reason for that is because in virtually all

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Speaker 2: these countries across the developed world, there's also a real

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Speaker 2: shortage of supply. There's just far fewer houses than people

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Speaker 2: that need to live in them, and so that's kind

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Speaker 2: of put a bit of a floor and meant that

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Speaker 2: house prices haven't reacted as much as they should have,

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Speaker 2: one would think, or as they need to to make

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Speaker 2: them affordable. Give an interest rates where they are.

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Speaker 1: So, how has all of this affected the global economies.

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Speaker 2: Well, it means that for the last decade and a half,

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Speaker 2: housing was a driver of the global economy. It was

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Speaker 2: a tailwind buying and selling building became a big part

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Speaker 2: of a lot of local, national, regional economies. For the

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Speaker 2: foreseeable future, it's probably going to be more of a headwind.

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Speaker 2: They'll just be less buying and selling. They'll also be

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Speaker 2: less building. Builders need to borrow to build, and it's

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Speaker 2: hard to do that when rates are as high as

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Speaker 2: they are, and particularly hard to do that when there's

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Speaker 2: fewer people buying. So all the activity that goes along

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Speaker 2: with building homes, all the activity that goes along with

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Speaker 2: buying homes. You know, when people buy a home, you

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Speaker 2: got to buy all sorts of white goods, appliances, furniture.

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Speaker 2: That's economic activity. And they'll just be less of that

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Speaker 2: given rates where they are, given the economy where it is.

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Speaker 1: So Kara, who is most affected by these rate increases?

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Speaker 1: Is there any part of the economy that's sort of

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Speaker 1: immune to them?

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Speaker 3: Well, depends on where you're looking around the globe. So

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Speaker 3: the US is actually relatively unique in its structure of

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Speaker 3: having thirty year fixed mortgages that are federally backed, and

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Speaker 3: so the effect on that is there are actually a

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Speaker 3: lot of winners and people who are benefiting from these

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Speaker 3: higher rates, and those are people who have mortgages.

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Speaker 4: That are locked in at low rates.

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Speaker 3: It's the people who are trying to get into the

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Speaker 3: market now and confronting still elevated prices unless supply combined

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Speaker 3: with higher borrowing costs, that are kind of running into trouble.

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Speaker 3: In other parts of the world, you have mortgages that

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Speaker 3: reset much quicker, you know, one year, two year, five years,

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Speaker 3: and those are people who are now facing higher payment costs.

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Speaker 3: And again, the people with loans, and particularly the people

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Speaker 3: who took on loans at peak prices during the pandemic

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Speaker 3: boom years and twenty and twenty one that you know,

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Speaker 3: we're maybe already stretching their budgets to pay for the

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Speaker 3: house itself, and now are stretching their budgets with bar

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Speaker 3: rowing costs at a pretty rapidly increased so they are

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Speaker 3: facing you know, higher payments and having to confront difficult

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Speaker 3: choices in how to maybe cut back on spending elsewhere

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Speaker 3: in order to keep their house.

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Speaker 1: Carol, let's take a look at the US. What does

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Speaker 1: the impact of sustained higher mortgage rates look like.

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Speaker 3: They're in the US, where the preferred financing mechanism is

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Speaker 3: a thirty year mortgages that are fixed rates. The impact

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Speaker 3: of what we're seeing is that homeowners who have already

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Speaker 3: locked in low rates are sitting on those and are

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Speaker 3: essentially not moving. So our supply has gone way down,

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Speaker 3: and that has led to people who are entering the

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Speaker 3: market to confront still high prices. So the media and

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Speaker 3: used existing home price is up forty three percent since

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Speaker 3: the start of twenty twenty, So already people are facing

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Speaker 3: very high prices.

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Speaker 4: And normally, when.

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Speaker 3: Borrowing costs would rise, those prices will come down. But

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Speaker 3: because there's just not enough supply out there, because few

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Speaker 3: homeowners want to give up their two and a half

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Speaker 3: percent three percent rate to move into a new house

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Speaker 3: and take on a seven or eight percent mortgage rate,

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Speaker 3: there's just not enough supply to meet demand. So you've

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Speaker 3: got now, what is the least affordable housing market since

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Speaker 3: the nineteen eighties, According to the Intercontinental Exchange and Goldman

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Speaker 3: Sachs estimates in twenty twenty four transactions will fall to

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Speaker 3: the lowest level since the nineteen nineties. So we have

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Speaker 3: just kind of essentially it's a frozen market. It is

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Speaker 3: what the professor at the Warton School, Benjamin Keys, called

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Speaker 3: the early stages of a glacial period, and it's unlikely

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Speaker 3: to thaw anytime soon.

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Speaker 4: It's just going to be a very long slog.

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Speaker 3: As Mark Sandy from Moody said in our story of

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Speaker 3: just the housing market muddling along, and that has knock

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Speaker 3: on effects limiting mobility for jobs. You might force family

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Speaker 3: members to live together and elderly people to age in place,

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Speaker 3: which just keeps more homes off the market that could

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Speaker 3: otherwise go to a family. And it's also you know,

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Speaker 3: more effects on building and supply, and it's just creating

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Speaker 3: the situation where few people will be able to buy houses,

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Speaker 3: which is a key driver of wealth.

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Speaker 1: So all right, this is clearly a global phenomenon, but

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Speaker 1: let's zero in on some individual countries to talk about

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Speaker 1: the situations there. New Zealand has experienced a massive boom

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Speaker 1: and property prices since the start of the pandemic. How

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Speaker 1: has the Central Bank's rate hikes there affected housing payments.

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Speaker 2: The Central Bank has raised its benchmark rate five hundred

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Speaker 2: and twenty five bases points since October twenty twenty one,

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Speaker 2: which is a lot in a very short amount of time.

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Speaker 2: And the thing that's unique about New Zealand compared to

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Speaker 2: the US is that mortgages have to be renewed or

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Speaker 2: refinanced every three years or less.

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Speaker 1: There.

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Speaker 2: That means borrowers who bought right at the peak are

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Speaker 2: facing a renewal really soon. Twenty five percent of mortgages

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Speaker 2: in New Zealand were taken out in twenty twenty one,

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Speaker 2: and that was approaching the top of the market right

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Speaker 2: now there, and a fifth of those were first time

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Speaker 2: home buyers. So there's just a very large pool of

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Speaker 2: people in New Zealand who will be exposed to these

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Speaker 2: higher interest rates over the course of this year and

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Speaker 2: into next year. That'll have an effect on their disposable income,

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Speaker 2: that'll have an effect on their lifestyles, and you're starting

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Speaker 2: to see that now. People are being forced to cut

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Speaker 2: back in their spending as they accommodate to this much

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Speaker 2: higher interest rate. Shock is what it's often called, and

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Speaker 2: that'll weigh on the New Zealand economy for the next

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Speaker 2: few years, and some people may end up in actual

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Speaker 2: financial distress. Some people who aren't able to cut back

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Speaker 2: their budgets elsewhere redirect money to interest payments. Some people

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Speaker 2: who just don't have enough money may find themselves in distress,

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Speaker 2: may end up having to sell their homes or have

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Speaker 2: the banks take their homes.

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Speaker 1: Are there any economic factors that are sort of helping

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Speaker 1: buffer against some of these more extreme outcomes.

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Speaker 3: Well.

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Speaker 2: New Zealand, like some of these other countries, benefits from

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Speaker 2: very good population growth, which helps support house prices, and

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Speaker 2: also low supply. Frankly, New Zealand is another country that

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Speaker 2: hasn't been building enough houses for a very long time,

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Speaker 2: and fundamentally those factors this imbalance between supply and demand

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Speaker 2: demand driven by population growth and supply which has been

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Speaker 2: constrained and looks like it will continue to be constrained

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Speaker 2: by various factors, including shortia's labor materials, limited land that's

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Speaker 2: zoned for residential that'll continue to sort of support New

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Speaker 2: Zealand home values even as this subset of mortgage holders

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Speaker 2: faced some tough years ahead.

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Speaker 1: After the break. How the high cost of borrowing is

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Speaker 1: affecting homeowners around the world, so ari in Canada more

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Speaker 1: so than most countries, the global housing boom contributed to

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Speaker 1: the purchase of investment properties. How has this changed with

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Speaker 1: the higher interest rates?

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Speaker 2: Investment in real estate became something of a cottage industry

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Speaker 2: in Canada over the last decade and a half. Recently,

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Speaker 2: a study from the government found that up to a

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Speaker 2: third of homes were owned by investors in two of

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Speaker 2: the country's most populous provinces, British Columbia and Ontario. It

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Speaker 2: really turned into a bit of a frenzy where that

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Speaker 2: was the place you put your money if you had

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Speaker 2: some savings, because there were just better returns in buying

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Speaker 2: a Toronto condo or a Vancouver condo and renting it

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Speaker 2: out than you could get investing in stocks or bonds.

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Speaker 2: But that switched right now. The surge and interest rates

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Speaker 2: the last year two years has really turned that out

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Speaker 2: on its head. So now Bank of Montreal did a

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Speaker 2: study buying a Toronto condo now would yield about three

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Speaker 2: point nine percent to an investor annually buying just a

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Speaker 2: Vanilla Government of Canada treasury bill. That's a one year

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Speaker 2: treasury bill that'll get you five percent, and so you

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Speaker 2: don't have to think about it very long. Owning real estate,

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Speaker 2: it's a bit of a headache. You got to keep

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Speaker 2: the thing from falling over. You got to make sure

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Speaker 2: people are paying their rent on time. A Treasury bill

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Speaker 2: doesn't require any of that, and so that is expected

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Speaker 2: to sort of draw some of this demand that has

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Speaker 2: helped spur the Canadian housing market to record heights. That'll

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Speaker 2: start to sort of be pulled away in the coming

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Speaker 2: years for as long as this math holds up.

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Speaker 1: So is this affecting the construction of new housing in Canada.

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Speaker 2: Absolutely. Another development of investors playing a bigger role in

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Speaker 2: the Canadian housing market has been they became a source

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Speaker 2: of financing for new development. New condo projects would sell

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Speaker 2: units pre construction, and of course the buyers for these

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Speaker 2: would be investors. Conda Developments had to sell us which

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Speaker 2: is eighty percent of their unit's pre construction to even

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Speaker 2: get a bank loan to get started. That math sort

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Speaker 2: of turned on its head now and developers can't rely

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Speaker 2: on it anymore. Thousands of units that were slated for

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Speaker 2: construction in Toronto in Vancouver have been canceled or put

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Speaker 2: on hold because there's not enough investor demand. So the

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Speaker 2: evaporation of this source of demand in the housing market

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Speaker 2: could end up limiting new construction in the future, and

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Speaker 2: that's a problem in Canada. It's also a problem in

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Speaker 2: other countries as well.

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Speaker 1: So ari where else are we seeing higher rates affect

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Speaker 1: the construction and the stock of new housing.

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Speaker 2: Well, it's actually a very big problem in Europe, where

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Speaker 2: similar to the US, similar to Canada, similar New Zealand,

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Speaker 2: there's a pre existing shortage of homes it's been building

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Speaker 2: over years. But in continental Europe the pace of construction

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Speaker 2: has really really dropped, largely because of high interest rates.

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Speaker 2: Developers need to borrow money to get developing and gusure

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Speaker 2: it's where they are prevent them from doing that. In Germany,

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Speaker 2: new building permits of fallen twenty seven percent. In France

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Speaker 2: they fall in twenty eight percent. Sweden, which is one

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Speaker 2: of Europe's worst housing crisis, is the building permits of

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Speaker 2: the worse since the nineteen nineties, and the pace of

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Speaker 2: building there is calculated to be about a third of

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Speaker 2: what the country needs to meet the needs of its

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Speaker 2: citizens to make sure everyone can find a place to

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Speaker 2: live in Sweden, so high interest rates when it comes

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Speaker 2: to the development of new homes has really made a

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Speaker 2: bad situation worse in Europe. And for as long as

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Speaker 2: these high rates persist, it's hard to see how the

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Speaker 2: problem in these European countries is going to get solved.

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Speaker 1: Sokara, We've talked a lot about how these rates are

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Speaker 1: affecting borrowers and some extent, but developers as well. What

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Speaker 1: about landlords, How is this affecting the rental market?

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Speaker 3: Well, the rental market in many places, you know, rent

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Speaker 3: gains have slowed, just as job gains have slowed, et cetera.

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Speaker 3: But there are as Ari was saying, people who looked

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Speaker 3: at housing as an investment, seeing the price gains everywhere,

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Speaker 3: So people who perhaps stretched themselves and took on extra

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Speaker 3: houses with the hopes of renting them out, thinking that

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Speaker 3: it was kind of like a no lose bet that

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Speaker 3: there will always be rental demand and interest in these houses,

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Speaker 3: to which you know extent, because there is a shortage,

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Speaker 3: there is going to be rental demand. But it's the

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Speaker 3: people who perhaps took on debt and especially variable rate mortgages,

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Speaker 3: that would then be running into trouble.

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Speaker 4: We're seeing this particularly pronounced in.

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Speaker 3: The UK, where the buy to lette industry is a

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Speaker 3: pretty big one, and you've seen mortgages there that reset

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Speaker 3: pretty quickly, and the landlords that took on these mortgages

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Speaker 3: are almost all variable rates, so they're seeing an increase

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Speaker 3: in defaults there by landlords. And the UK is of

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Speaker 3: course dealing with a pretty severe cost of living crisis

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Speaker 3: with higher energy prices and the effects of the Ukraine

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Speaker 3: War really playing out there. So that's another area where

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Speaker 3: this rapid increases rates is really hitting both the housing

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Speaker 3: market and the people who are benefiting it for so

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Speaker 3: many years, landlords being one of them.

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Speaker 1: Ari and the story you write that the impact of

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Speaker 1: sustained higher mortgage rates will be most pronounced in twenty

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Speaker 1: twenty four.

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Speaker 2: Why is that this is particularly in the US, but

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Speaker 2: it really applies to most countries. Tell you the truth,

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Speaker 2: it's because the pain from a higher interest rates is cumulative.

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Speaker 2: It gets harder the longer you have to bear them. Someone,

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Speaker 2: let's say, with a variable rate mortgage who saw their

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Speaker 2: payments or their interest rate go from two and a

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Speaker 2: half to three percent up to seven percent, may think

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Speaker 2: I can bear that seven percent for a few months,

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Speaker 2: But the longer you get past that few months, the

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Speaker 2: harder it gets. So you see that, I mean in

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Speaker 2: countries with a high proportion of variable rate mortgages like

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Speaker 2: the UK for those buy to let landlords. In Canada

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Speaker 2: there's also very high percentage of variable rate mortgages, also Australia,

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Speaker 2: and anyone who has to reach new in one to

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Speaker 2: three years. Those are people that got in with the

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Speaker 2: lowest possible rate who are now going to have to

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Speaker 2: refinance at the highest rate in decades. And the longer

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Speaker 2: they have to deal with that, the harder it's going

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Speaker 2: to get. Which is why in a lot of countries

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Speaker 2: where there's a big wave of refinances coming in twenty

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Speaker 2: twenty four, the housing markets there could get worse. And

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Speaker 2: you see that in New Zealand, you see that in Canada.

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Speaker 2: In the US, where there's not the same refinancing risk,

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Speaker 2: it's also expected to get worse. Strangely enough, and that's

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Speaker 2: just because the freeze the CARE was talking about, the

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Speaker 2: glacial period. It also gets worse the longer it goes on.

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Speaker 2: Any buyers or sellers who for whatever reason had to

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Speaker 2: or ready to already at the beginning of this period

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Speaker 2: of higher interest rates, they've made their move and so

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Speaker 2: they'll just be fewer houses for sale, fewer buyers able

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Speaker 2: or willing to buy. The longer we go into this

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Speaker 2: era of very high interest rates, which for casters like

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Speaker 2: Goldman Sachs expect to continue in the US into next year.

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Speaker 1: So, Cara, that all sounds kind of grim. Do you

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Speaker 1: see any relief coming from high mortgage rates or the

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Speaker 1: shortage of housing stock?

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Speaker 3: Well, not really, not anytime soon. I mean, the Federal

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Speaker 3: Reserve has signaled we are in a higher for longer era,

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Speaker 3: and that's kind of what it all boils down to.

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Speaker 4: Last year. You know, when rates began rising.

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Speaker 3: There was this concept around the US that mortgage brokers

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Speaker 3: would try to sell marry the house, state the rate,

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Speaker 3: figuring you could just buy the house you need to

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Speaker 3: buy and you can worry about refinancing you rate longer.

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Speaker 4: Well, you know a.

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Speaker 3: Lot of those people, they're not gonna be able to

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Speaker 3: refinance into anything lower probably anytime soon. There might be

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Speaker 3: some moderation, as you know, the Fed pauses potentially even

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Speaker 3: cuts if the economy slows, but you know, you're not

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Speaker 3: going to go back to three percent anytime soon. So

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Speaker 3: it's just going to make it harder and harder for

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Speaker 3: people to enter the market. The bright spot is like

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Speaker 3: nobody is calling for a housing market crash, which arguably

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Speaker 3: would be far worse for the economy, for the financial system,

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Speaker 3: and to see prices plunge to the point that it

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Speaker 3: hurts everybody and hurts the economy. So we're sort of

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Speaker 3: in a better situation than we were in say, two

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Speaker 3: thousand and eight, when there were foreclosures incredible distress and

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Speaker 3: pain for people being forced to sell. Now it's just

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Speaker 3: a frozen state, and so you know, you could argue, you,

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Speaker 3: I guess that's better than the financial crash, you know,

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Speaker 3: but a lot will depend on what happens with the economy.

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Speaker 3: I think it's you know, still remains to be seen,

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Speaker 3: just kind of what lies ahead in twenty twenty four

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Speaker 3: for the economy. And of course there's all sorts of

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Speaker 3: things we don't know that could happen and effect things

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Speaker 3: either way and potentially push housing prices down if there

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Speaker 3: was an economic slowdown and job losses, and that might

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Speaker 3: make it a little easier for borrows to enter and

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Speaker 3: make the FED decide to cut rates and thaw things

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Speaker 3: out a bit. But as of right now, I think

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Speaker 3: we're talking years where we might be the situation in

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Speaker 3: the US.

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Speaker 1: When we come back. How persistent high rates will shape

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Speaker 1: global economies in the years to come. So Ari Kara

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Speaker 1: mentioned the US Federal Reserve and this idea of higher

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Speaker 1: for longer, higher interest rates to try to stamp out inflation.

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Speaker 1: How are other nation central banks looking at this problem

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Speaker 1: and are there taking any steps to help?

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Speaker 2: I think generally the higher for longer eras a global phenomenon.

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Speaker 2: I mean, the US is unique in the fact that

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Speaker 2: the economy is just humming along despite the higher rates,

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Speaker 2: and so other places that we talked about, like Canada,

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Speaker 2: like New Zealand, other countries that have higher debt loads,

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Speaker 2: higher consumer debt loads than the US, and like we

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Speaker 2: said before, have more frequently renewing mortgages. They're more exposed

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Speaker 2: to those higher interest rates, and so they're starting to

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Speaker 2: feel it already and they're probably going to be starting

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Speaker 2: to feel it more in the next year or two,

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Speaker 2: and so that will put more pressure on central banks

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Speaker 2: in those countries to cut rates earlier, as their economies

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Speaker 2: will slow faster and potentially more severely. But overall, our

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Speaker 2: interest rates and mortgage rates going back to what they

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Speaker 2: were in twenty twenty, twenty twenty one, even for a

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Speaker 2: good chunk of the decade and a half before that,

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Speaker 2: probably not. And that is really a global change that

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Speaker 2: I think only recently is started to sync in to

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Speaker 2: financial markets, professional traders, but also just regular people for

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Speaker 2: whom the most important interest rate is the one that

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Speaker 2: allows them or doesn't allow them to buy a home.

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Speaker 1: So, Kara, what are you watching for sort of next?

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Speaker 1: What do you think might be the next story we

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Speaker 1: might be writing in this incredibly interesting series of developments

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Speaker 1: around mortgage rates.

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Speaker 3: I think we're waiting for signs where buyer demands is

397
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Speaker 3: somewhat exhausted and people gave up, and maybe there are

398
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Speaker 3: signs that the borrowing costs are just too high, so

399
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Speaker 3: there will be sellers out there like regardless, some people

400
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Speaker 3: do need to sell and move for whatever reason, and

401
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Speaker 3: people will decide to put their homes on the market,

402
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Speaker 3: and maybe it will slow down and so prices will

403
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Speaker 3: moderate somewhat and perhaps enable more buyers to get in.

404
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Speaker 3: We will be closely watching the Fed and Treasury yields

405
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Speaker 3: to just see signs that mortgage rates will come down.

406
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Speaker 4: They have come down somewhat in recent weeks. As FED

407
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Speaker 4: has signaled, you know that it might stay on pause

408
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Speaker 4: for a while. Now.

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Speaker 3: Maybe home buyers who've grown accustomed to the fact that, okay,

410
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Speaker 3: mortgage rates are at this level and will be for

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Speaker 3: a while, are just going to make it work and

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Speaker 3: buy it because fundamentally, people do need to buy homes,

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Speaker 3: and you're just going to have to accept the fact

414
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Speaker 3: that it's going to cost more to do that. So

415
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Speaker 3: you can still see some sort of leveling of supply

416
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Speaker 3: and demand. But which way is it going to go.

417
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Speaker 3: Is it going to be the rebound in demand from

418
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Speaker 3: people accepting these higher rates, or is it going to

419
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Speaker 3: be kind of supply edging up as homeowners decide to

420
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Speaker 3: sell and there is more of a balance there.

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Speaker 1: All right, what are you watching for globally in this front?

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Speaker 2: I think in this short term I'll be on the

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Speaker 2: lookout for distress in a lot of these countries, These

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Speaker 2: countries that have a high proportion of variable rate mortgages,

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Speaker 2: a high proportion of mortgages that need to be renewed

426
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Speaker 2: or refinanced after two, three or five years, that wave

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Speaker 2: of renewals could get some homeowners into trouble. And with

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Speaker 2: interest rates expected to stay where they are. That means

429
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Speaker 2: there's not a lot of buyers, and even a marginal

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Speaker 2: increase in forced sellers put some pressure on prices, and

431
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Speaker 2: so I think that'll be something to watch over the

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Speaker 2: next three to six months. By the middle of next year,

433
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Speaker 2: more economists outside the US are starting to think interest

434
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Speaker 2: rates could at least start coming down, and short term ingistrates,

435
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Speaker 2: the ones controlled by central banks, those starting to come

436
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Speaker 2: down cause long term interistrates bond yields, which are dictated

437
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Speaker 2: by traders in the bond market, that could cause them

438
00:24:25,760 --> 00:24:29,640
Speaker 2: to come down more too, which means both fixed rate

439
00:24:29,680 --> 00:24:32,680
Speaker 2: mortgages which are set off bond yields, and very rate mortgages,

440
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Speaker 2: which are set off central bank rates, could start to

441
00:24:35,960 --> 00:24:38,879
Speaker 2: come down. It'll be interesting to see what happens with

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00:24:38,920 --> 00:24:42,640
Speaker 2: the housing market when that happens, because you'll see already

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00:24:42,680 --> 00:24:46,480
Speaker 2: supply is starting to build from the distress we have

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00:24:46,680 --> 00:24:50,439
Speaker 2: seen and the pressure of high interest rates, and so

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00:24:51,000 --> 00:24:56,919
Speaker 2: the marginal increase in the demand may offset that may not,

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00:24:57,600 --> 00:25:01,000
Speaker 2: And that'll be the real question. And the real estate

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00:25:01,040 --> 00:25:04,439
Speaker 2: market is a very seasonal market, and everyone spends their

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00:25:04,480 --> 00:25:07,240
Speaker 2: time waiting for the big spring market, when most buyers

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00:25:07,280 --> 00:25:10,200
Speaker 2: and sellers decided to come, and I think in places

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00:25:10,280 --> 00:25:14,840
Speaker 2: like Canada, Northern Europe, the UK, the spring market is

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00:25:14,840 --> 00:25:18,320
Speaker 2: going to be an interesting bell weather because a lot

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00:25:18,359 --> 00:25:22,679
Speaker 2: of people who might have to sell might be holding

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00:25:22,720 --> 00:25:26,640
Speaker 2: on until then. And that's also a time when central

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00:25:26,680 --> 00:25:30,679
Speaker 2: banks may start to lower interest rates or signaling that

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00:25:30,720 --> 00:25:33,959
Speaker 2: they could lower the strates, which would cause bond yields

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00:25:33,960 --> 00:25:36,639
Speaker 2: to come down. And so I think that the spring

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00:25:36,680 --> 00:25:39,000
Speaker 2: market will be a key test for real estate markets

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00:25:39,000 --> 00:25:39,800
Speaker 2: in a lot of countries.

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Speaker 1: Thank you Kara, thank you Ari.

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Speaker 4: Thank you Craig.

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Speaker 2: Thanks Craig.

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Speaker 1: Thanks for listening to us here at The Big Take.

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Speaker 1: It's a daily podcast from Bloomberg and iHeartRadio. For more

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Speaker 1: Email us questions or comments to Big Take at Bloomberg

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Speaker 1: dot net. The supervising producer of The Big Take is

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00:26:09,200 --> 00:26:13,879
Speaker 1: Vicky Vergalina. Our senior producer is Catherine Fink. This episode

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00:26:13,960 --> 00:26:18,000
Speaker 1: was produced by Sam Gebauer. Hilda Garcia is our engineer.

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Speaker 1: Our original music was composed by Leo Sidron. I'm Craig Gordon.

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Speaker 1: We'll be back tomorrow with another big take.