Home Buyer's Spoiled By Low Rates

Home buyer's have become jaded by consistently low rates over the past 10 years. To a current home buyer's the interest rates hitting 4.75% is no big deal and does nothing to create a sense of urgency in their home search.

Any of us who were in the market prior to the year 2000 know exactly what I mean. Back in the 90's when I purchase my first home I was able to get a fantastic rate of 7.25%. Just to give you a quick idea of the difference, the same house at the same price, monthly payments at 7.25% $1,844, at the current 4.75% $1,527. I can remember when 14% was a good deal, buyers today can not even imagine that.

Interest rate makes a huge difference in payments and also in purchase power. The lower monthly payment allow more home for your dollar. More money going to purchase price and not out the door in interest.

The current lows of below 5.0% can not last forever. This time to buyer period will end and we return to a seller's market in the future. The bottom line for home buyers, get out and get it while you can. When the rates do jump (and they will) you want to be locked in at 4.75% while your new neighbors are purchasing at 6.875%, you will be bragging about that for years to come.

I think we need to see rate increases if we are ever going to get back to a normal flow. Maybe a rate increase at this point would light a fire under the buyers and not end up with the price tag of the tax credit.

My two cents.