A couple of weeks ago, I made a statement reflecting analyst predictions that interest rates would reach 6% by year end. I'm not even sure the ink is dry on that one, and now interest rates are trending lower. Now before you make fun of me, I can explain.
Here is what happened. Greek President George Papandreou didn't give me or anyone else any indication that the Greek economy was about to tank, and spank the Eurodollar around in the process. All of Europe is nervous about all the loans made to Greece, who has been on a borrow and spend spree for some time. Sound familiar? On top of that, North and South Korea are in a pretty frightening confrontation, and we were already in a global economic pickle. There suddenly has been a global flood of interest in finding a safe investment haven, and US bonds are still considered among the safest investments in the world. The increased demand for bonds has a positive effect on our domestic interest rates for the time being. So once again, events halfway around the globe can directly influence our "local" real estate market.
Even though the Fed is discontinuing their purchase of mortgage backed securities, which has been artificially dampening interest rates, these new developments have taken shape to accomplish the same function. That probably won't continue to be the case for long. Recent mortgage rates are in the high four percent range, and predictions are that they may go as low as 4.5% this summer.
It is important to remember that the original interest rate predictions were based on conditions that still exist. With that said, all it will take is for the perceived attitude about the European economy to improve, and the demand for mortgage securities will slow down. The problems we have with the secondary mortgage market, combined with our own exploding debt will push rates higher. Most of the economic pundits are still predicting increasing rates over 2011 and 2012.
The bigger question is not IF rates are going up, but WHEN rates are going up. Part of the problem we have as a society today is that we have enjoyed such a long run of low interest rates that we take them for granted. We currently have rates that can only be compared to those going back for several generations. Human nature is not to be thankful for a great deal. We get greedy. We have to have the absolute rock-bottom number to be happy. People actually get bummed if they buy gas and find it two cents cheaper the next day (like that forty cents is a big deal). If they bought it in 1969 they could have saved $2.25 a gallon! But you can't buy gas for 29 cents a gallon anymore, and if you wait you won't be able to get a mortgage loan for 4.75% anymore. If it goes down to 4.5%, people will still think you're a genius ten years from now.
I know I say this all the time, but with the choices available in the market at what are currently incredibly low prices, there has never been a better time to buy a home. If you are fortunate enough to have a job, like 90 percent of the population, you need to go for it now. Seriously. There are just some times in life that you need to go for it! Having a little buyer's remorse for a couple of weeks is a lot better than a lifetime of missed opportunities.
Ron Barnes can be reached at 678-520-6648 or rbarnes@prudentialgeorgia.com. Prudential Georgia Realty is an
independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential FinancialCompany.
Equal Housing Opportunity. Statistics are taken from Trendgraphics.
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