The following piece outlines reasons why waiting for prices to fall in not always a good decision. The last sentence sums up why.
Mortgage Rates Rise For The 7th Straight Day
Mortgage markets worsened for the 7th straight day Tuesday, equaling the longest losing streak of the last 5 years.
Conventional, 30-year fixed mortgage rates are now scratching 5 percent, with FHA mortgage rates running roughly the same.
This is a huge increase from just 11 weeks ago when mortgage rates were riding an 8-month-long hot streak, and appeared headed into the 3% range. Then the Federal Reserve intervened.
On November 3, as additional support for markets, the Fed announced its second round of bond buys, a $600 billion program dubbed QEII - short for Quantitative Easing, Round II. Wall Street got spooked on the news; investors feared runaway inflation.
That's when low rates ended. Here's why:
(A) Inflation makes the U.S. dollar lose its value.
(B) U.S. mortgage bond payments are paid in U.S. dollars.
Therefore,
(C) Inflation makes mortgage bond repayments lose their value.
When mortgage bond repayments are worth less, bond demand falls among the global investor set and that causes bond prices to fall along with it. When bond prices fall, mortgage rates rise and that's exactly what we're seeing right now.
Since the Fed's QEII announcement, mortgage rates have soared and home affordability is taking a hit.
Given recent trends, it's probably safe to declare the Refi Boom "officially over." Home prices may move up or down this year, but rising mortgage rates could render the point moot. If you're looking for a great "deal" with low, long-term payments, the time to get in contract may be now. Though rates have moved up 1% since November they are still at historical lows.......but no one knows for how much longer.
For every 1% mortgage interest rates rise, consumers lose about 10% of their purchasing power.
Because of rising mortgage rates, homeowners have lost roughly 11% of their purchasing power since November.
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