By Jann Swanson | Mortgage News Daily
Two Bank of America Merrill Lynch (BAML) analysts are defending what they call their big high conviction views for what should happen in the housing world over the next two years. Chris Flanagan and Gregory Fitter, ABS and MBS strategists say that their views are not mainstream but that recent data has corroborated their theories.
The two contend that home price increases will continue to moderate from the skyrocket trajectory they were on in late 2012 and early 2013 will peak in mid-2016. Second, as unemployment continues to ease, the yield curve will continue to flatten (longer term rates getting lower while shorter term rates get higher, relative to each other) and the spread between two year and 10 year treasury yields should be at zero by the time home prices peak. The long end of the curve will remain at surprising low yields, fostered by a soft housing market and low inflation.
