Earlier in the year there was increased optimism that theFederal Reservewould begin to ease interest rates to the enjoyment of many would be home buyers. Now it appears at least for the moment, that interest rates may move up before they begin to move down. The money supply, it is a tight'nin. I also received notification yesterday that one of our lenders was no longer doing stated loans on owner occupied properties up to a 95% loan to value ratio. This applied to home equity lines of credit or second trust deeds.
I am convinced that everything moves in cycles. Several years ago 100 % financing was unheard of and certainly not available to the masses. Then someone had a brainstorm and figured out ways to make home ownership more affordable. Lending standards were eased, enabling many more people to participate in the American Dream. Now with the recent increase in foreclosure activity, the pendulum is swinging the other way. Give it another 5-7 years and it will reverse itself. Bingo, the cycle is complete.
Call me an optimist, but I have to believe interest rates will come down.
I think some key indicators are in place such as Lowes and Home Depot
reporting disappointing earnings. A slower housing market is having major implications for two of our biggest retailers. This economy cannot forge ahead with gas prices at $3.75/gallon. Picture a cruise ship streaming towards the US from Europe in the middle of the Atlantic Ocean. If the captain hits the brakes to turn around, momentum is going to continue to carry the ship forward before it stops. Maybe the cruise ship is akin to the US economy, we're still driftinig forward.
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