As a real estate professional I know we all look at low rates and realize that it's a fairly crucial element to keeping the market moving. An increase in rates would probably topple the market on it's face fairly quickly, unless prices took a equalizing drop. That sort of drop would be catastrophic for banks, consumers, the economy and so on.
A little something interesting: For every 1% increase in interest rates over 4% home values have to fall about 10% for the payment to remain the same....do me a favor and chew on that for a minute. It's not pretty I will assure you of that.
Okay so unbelievably low rates and falling (still) home prices make for the perfect time to buy. I found myself chuckling while typing that last sentence because I can't remember a time in my real estate career when it wasn't an "excellent time to buy." On a more serious note it really is a great time to buy for MOST people. If you plan to stay in your home for more than 5 years or forever today's interest rates can prove to be a personal hedge against inflation. Inflation is coming we're seeing it in food prices and services mostly driven by transportation costs at this time.
When will my home increase in value? I'm ready for inflation.
This is something I've been mentally wrestling for a while. Will the "a little something interesting" fact due to rising interest rates wipe out any potential net gain in values from Inflation? Honestly I'm not sure. I don't make the claim to be an economist. However, I fear that without ample demand for housing and a solid job market we are going to lumber along at the same pace we are now.
Okay so something else...if prices fall enough new construction could become nearly impossible TO FINANCE in some markets. In my opinion this will probably be the true bottom of the market. Supply will remain the same and with some luck demand will increase which will eventually start to bring back values.
What do you think? Agree/Disagree?
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