As I watch the bond market sink to levels not seen since last June, I’m contemplating how it is I didn’t take my I own advice right here in The Real Estate Conversation, which was to start my refinance in October (I waited until November).

If you read yesterday’s blog, you’ll recall I mentioned yesterday that I had the good fortune of hosting a marketing group meeting of which I was the designated sponsor of the speaker.  Since economics are a hobby of mine, I figured I’d see if I could find someone from the Center for Research and Forecasting at California Lutheran University, right here in Thousand Oaks, Ca.  A coup is the best way to put my success in having Professor Dan Hamilton, one of the Center’s founders, come in and speak to my group of a dozen Realtors.

During his presentation (again see yesterday’s blog for more on that), Professor Hamilton barely touched on the deflation vs. inflation debate, so afterward I was compelled to corner him in the parking lot and ask – which is the bigger worry?  His response: deflation.  In the absence of any measurable inflation, he said, deflation is the most immediate concern.  This validates the Fed’s push for Quantitative Easing 2.  Then came yesterday’s the bond market meltdown.

If deflation is the worry, why are people rushing out of bonds, especially with housing’s recovery so tentative and more importantly to me immediately, my interest rate on my refi, not locked in?  So I emailed Professor Hamilton and asked him, “What do you think is going to happen to rates near term?”  Hamilton said, though difficult to predict short term moves, he sees long term inflation, and near term rates rising slowly, but maintains that deflation is the more immediate concern with our economic recovery so weak.

Uh,… so do I lock in now? I wanted to ask, but I didn’t.  But what about it?  He said rates will rise slowly, but deflation remains the bigger issue; how does that work?  I guess the concept is that in the future, inflation is looming, so the bond market traders are anticipating that and pushing rates now.  So the real question isn’t whether they will rise but by how much and when?  And what does that mean for home sales?  The answer may not be as obvious as you think… more on that tomorrow.