Inverted Yield Curve.

The United States Treasury Yield Curve is currently inverted. Read below to understand what that might mean for you, and your home-buying goals. 

Let’s start with what the ‘Yield Curve’ is. The yield curve is the rate of return you can expect to receive when you purchase a US treasury bond. A normal yield curve shows rising rates for greater durations of bonds (the longer you hold an investment the riskier it becomes — essentially, the higher the risk, the higher the return)

So an ‘Inverted Yield Curve’ is when shorter bonds are selling for higher yields (rate of return) than longer bonds.

Bottom line: An inverted yield curve has historically been a very reliable indicator of an upcoming economic recession. For the last six recessions, 100% of the time — a recession on average began 6 to 18 months after the curve inverted.

How does this impact home-buying and real estate?

According to historical data, we know that in most recessions, interest rates declined. We also know that more than half of the time we hit a recession, property values have gone up. If you have the financial means, now is actually a great time to buy, and here’s why: you’re less likely to get into a bidding war and can refinance your home at a lower rate in the future, all while taking advantage of the opportunity to maximize returns as your home builds appreciation (the average annual rate of appreciation in San Diego over the last 35 years is 6%)