10 year bonds are typically used to hedge 30 yr mortgages. The current yield on the 10 year portends possible lower mortgage rates if the risk spread over treasuries remains the same. Coupled with the demand increase for housing stock outside of urban areas and we could see a very robust real estate market in the next 6 to 12 months...but this will be dependent on the three factors of real estate buying and investing...location, location & location.
Average NYC prices have come down as people flee crowded urban areas...I don't think this will last. I have been waiting for a real estate reckoning for NYC since 2007 with no luck. Foreign money has dried up quite a bit especially for the Manhattan high-end and semi-high end property markets. Chinese, Russian and Latin American inflows appear to have dried up quite a bit and the current pandemic is adding the cherry on top in terms of downward pressure. But will this be a true reset? Will urban flight continue? I doubt it.
Once we get an effective Covid 19 vaccine, the fear of congested areas will disappear quickly. People love the culture and opportunities of an urban landscape and so I believe the cities will make a comeback on the residential side.
Commercial real estate (retail and office) face substantial headwinds even after we get a vaccine I believe. The work-from-home paradigm has shown that people can be just as, if not more, productive when given the opportunity to work at home in their pajamas, especially for non-client facing roles. Companies see the huge potential savings in downsizing expensive office space and outsourcing this expense to their employees. Employees love the work from home option. Will we see a permanent work from home segment going forward...I think yes.
Cheaper funding for residential real estate financing should help offset some of the decrease in demand in the urban areas but I don't think commercial office and retail will be so lucky.
