"Still historically low."
Chances are, if you're reading a story about home mortgages or chatting about the real estate market, those three words will be included somewhere in the discussion.
As much as we all know that interest rates are likely to rise over time, the unknown aspect in the equation is to what degree rising rates will slow demand for housing.
"Higher mortgage rates definitely hit demand. There's no question about that," says PIMCO's Mark Kiesel in the attached video. "But overall, affordability is still quite attractive right now," the Morningstar Fixed Income Manager of the Year adds, "and near term, the direction is still higher in terms of prices."
A real-life example of this came out earlier today, when D.R. Horton (DHI) - the country's largest home builder - reported a 2% drop in orders from a year ago but a 14% increase in the dollar value of those orders.
"Rates are up a little bit but not enough to constrain demand," says Kiesel, cognizant of the fact that borrowing costs are still historically low. "The best time to buy a house was really 12 or 18 months ago, however if you look at long-term averages, affordability is still quite attractive."
That's especially true, he says, "in places where there are jobs and people want to live," simply because inventories are coming down and demand is not.
"It's simple supply and demand," Kiesel says, "and there's more demand than there is supply right now."
More from Breakout:
Walmart Makes it Official: Thanksgiving Is Dead
Why the Golden Age of American Cities Is Here and What’s Really Behind It
Gas Prices Headed Below $3! How to Invest When Consumers Win