Don't Fight the Fed

If you are a housing bull, you have a few macro-economic conditions working against you. First and foremost, interest rates are on the rise. Think back to last summer, I remember the many prognosticators, pundits and economists were predicting that the fed would stop raising interest rates by the end of 2005. That was 100 basis points ago and rates keep getting pushed higher.

“U.S. Treasuries are off to their worst annual start in seven years and may drop further after the Federal Reserve signaled that interest rates will rise.

U.S. government debt of all maturities lost an average of 1.2 percent this year, compared with a 1.6 percent decline in the first quarter of 1999, according to Merrill Lynch & Co. index data.

Treasuries fell 0.3 percent after the central bank last week lifted rates by a quarter point for a 15th consecutive time, to 4.75 percent, and said ``further policy firming may be needed.''
Economists at Barclays Capital Inc. boosted their forecast for the central bank's interest-rate target by 75 basis points to 5.5 percent. Credit Suisse Securities USA LLC and Barclays joined Bear Stearns & Co. in predicting 10-year note yields this year will exceed 5 percent for the first time since 2002.”

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