ML-Implode News - "People Buy Payments" & Why Rates CAN'T Rise

In 1968 the average American family maintained a mortgage payment, as a percent of real disposable personal income (DPI), of about 7%. Back then, in order to buy a home, you were required to have skin in the game with a 20% down payment. Today, assuming that an individual puts down 20% for a house, their mortgage payment would consume more than 23% of real DPI. In reality, since many of the mortgages done over the last decade required little or no money down, that number is actually substantially higher. You get the point. With real disposable incomes stagnant, a rise in interest rates and inflation makes that 23% of the budget much harder to sustain.
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The ramifications of rising interest rates do not only apply to home prices, but also on virtually every aspect of the economy. As rates rise so do rates on credit card payments, auto loans, business loans, capital expenditure profitability, leases, etc... given the current demographic, debt, pension and valuation headwinds, the future rates of growth are going to be low over the next couple of decades until a "clearing" process is completed. (This is what the "Great Depression" provided.)

While there is little room left for interest rates to fall in the current environment, there is also not a tremendous amount of room for increases.

This is what the bond market continues to tell you if you will only listen. With the 10-year bond close to 2%, and the yield curve flattening, future rate increases are limited due to limited GDP growth due to "secular stagnation." Therefore, bond investors are going to have to adopt a "trading" strategy in portfolios as rates start to go flat-line over the next decade.

Relevant:

"People Buy Payments" & Why Rates CAN'T Rise