Back in the spring we sounded alarms that due to rising interest rates and rising prices buyers on the fence should seriously consider purchasing sooner rather than later. On July 5th we posted a graph on our Blog “What Do Buyers and Sellers Need to Know About Rising Interest Rates?”
Back then we shared a chart which we’ll re-print today that showed how much purchasing power a buyer lost in 2 short months when rates rose a little over 1% in that time. A buyer lost about 10% purchasing power due to rising rates, not to mention prices have been going up so it became increasingly harder, if not impossible to find the same home for less money.
We bring this up because we think it’s going to happen again. Prices are still rising and rates have dipped a little bit. As of today Bankrate.com is reporting a 4.33% 30 year fixed rate mortgage.
The reason we see rates going up in 2014 is because the Fed has signaled it will cut back in buying US Treasuries that have been keeping rates low. Market forces would say we should have rates over 5% but the US government has been trying to spur the economy by buying down the rates. It sounds like robbing Peter to pay Paul, and it is really, but its net effect has been to keep rates down which helps people buy homes. When people buy homes, they also buy appliances, carpet, paint, etc. Each home sale sets off a chain of events that pumps money into the economy.
As the economy improves there is more pressure for the Feds to cut back on this program. Several large industry publications are speculating that possibly ObamaCare will harm the economy buy taking disposable income out of consumers and forcing them to either buy insurance or pay higher premiums. If this does harm the economy, the Feds will be able to continue buying down the rates artificially. If the economy would improve rates will go up.
We have artificially low rates that will rise someday, and many are banking on 2014 coupled with rising prices nationally and locally. Prices may come down nationally for a few months due to seasonality but they do start heading up again in Feb or March if history holds true.
We also posted an article on June 13 on the Blog on how rising prices and rising interest rates affects a buyer’s down payment and monthly payment. In one year the average down payment went up $8,360 and the average monthly payment went up $173.23 It’s getting harder and harder for buyers to save up the down payment, and the longer they wait the more they have to come up with. With rising rates, putting more down doesn’t mean lowering the payment. This is why buying now could save you both ways.
We’re not saying this to spur more sales. I think the public thinks Realtors just do this because they need more sales. In fact, inventory is limited and it’s tough finding homes for buyers. There is no shortage of buyers, there’s a shortage of sellers. We say this to inform you of your options and hopefully educate you on what’s best for you. What we say is also backed up by facts and evidence that you can go back and read for yourself and compare to today.
If you’d like to search the MLS check out www.TopAgent.com and hopefully you’ll find a home that meets your needs. Feel free to call us too at 239-489-4042 Sometimes we know about certain properties coming to the market before they hit MLS, or we may be able to help you with your online search.
To search the MLS for properties go to www.TopAgent.com or give us a call at 239-489-4042 Good luck and Happy House Hunting!!!
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