Buying A Home? You Will Be Happy You Listened To This!
Buying A Home? You Will Be Happy You Listened To This! You are hearing it everywhere you turn now, the real estate market is turning around and is on the rebound! Happy days are here again! Right? Not so fast! I held an impromptu open house out of sheer necessity recently and we had 31 showings in 3 hours that we have record of...many more came through without having been invited. There were many tales of frustration from home buyers who just a few months ago had their pick of a much larger inventory and now they are feeling like they are being shut out of this market of ours! One lady shared that she has made 63 offers on as many properties and she has still not been able to buy a place!
I was begging her as I am any buyer that is out there in this current market to keep trying! In just a short time, all the buyers that are trying to buy now are going to wish they had!
Here is what I mean, right now interest rates are at historically very low levels because the Federal Reserve or The Fed as it is known is currently and has been for sometime now buying Mortgage Backed Securities and US Treasuries to keep interest rates artificially low, to spur the economy and help the real estate market recover.
The Fed is scheduled next year to stop subsidizing these securities and thus allow interest rates to go back to "market" rates. In fact, as the economy begins to really recover as it is starting to the Fed will stop keeping interest rates artificially low because they don't want to overheat the economy and cause a huge run up in inflation. As you can see, the Fed is in a precarious position.
In addition to the Fed, the current administration is "unwinding" Fannie Mae and Freddie Mac as quickly as they can and that will cause interest rates on mortgages to increase by at least one percent to the rate.
So, why will you be happy you listened to this? Let's do some math shall we? The current fair market mortgage interest rate without the Fed's help is a minimum of 7% annual interest rate currently. In addition, Fannie Mae and Freddie Mac, once they are unwound, will cause mortgage rates to increase by at least 1% annually. So coming up, much sooner than we want it to, are annual mortgage interest rates of 8% plus!
You may be asking yourself, what does this have to do with me? Easy, if you are pre approved for a home loan at an anticipated annual interest rate of say, 3.5% and rates go up to 8% what happens to your pre-approval? It disappears and those buyers who didn't give up and locked in 3.5% for the next thirty years are going to be glad they did!
So if you are currently in the market to buy a home, hang in there! You will be happy you listened to this!
As always, thanks for listening!
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