With long-term yields likely to stay elevated under $40 trillion in federal debt, a real adjustment must come from sellers, since homes will find buyers once prices fall far enough to make a 7 percent mortgage affordable.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

One hears a lot these days from real estate agents and other observers of real estate markets who are complaining that mortgage rates are too high, and therefore no one is buying. But if we take a closer look, we find that the problem is no more high interest rates than it is high prices. Moreover, we're likely to find in the near future that it's a lot easier to simply get sellers to lower prices than it is so get mortgage rates to come down to their ultra-low levels of a few years ago.

To understand this better, let's begin with a look at 10-year Treasury bonds. 

On Wednesday, The US government sold $39 bilion worth of 10-year notes to investors, with the high yield for the auction at 5.3 percent. There was solid demand at the auction and put to rest some fears that a rapid bond sell-off might spiral as demand for bonds deteriorated. So, Wednesday's auction showed that bonds are unlikely to be dumped wholesale in the near future. 

Yet, the auction hardly showed that investors are clamoring for Treasurys at low yields. After all, the auction established a new higher yield for new debt, at 5.3 percent, and well above where yields were just a year ago. In other words, there were indeed buyers for the bonds at the auction, but investors were demanding a higher return to make bond-buying worth it. It is always possible to get investors to buy bonds when the price is low enough and the yield is high enough. Investors do buy so-called "junk bonds," after all. All that is necessary is a high-enough yield.