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Fed to Keep Rates Low Through 2014, BUT CONSIDER...

Real Estate Agent with Keller Williams Keystone Realty RS294813

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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David E. Monsour, Realtor

Keller Williams Keystone Realty, Gettysburg, PA 17325



JOSH EVANS *JoshEvansHomes 516-655-5000
Village Properties of Mineola, LLC - Mineola, NY

Great blog and great job. Keep up the good work and good luck to you this year. Thanks

Jan 26, 2012 11:23 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

We are still lopsided as far as Supply(Listings) and Demand(Buyers). Most of our markets have 10-13 months of inventory. Worse yet normal,performing homesellers are being forced to compete with wholesale REO and shortsale sellers. It's not a pretty picture !

Jan 30, 2012 06:12 AM
Walt Wensel
Iron Valley Real Estate - York, PA
Blending personal service with today's technology!

I really believe a slight "up tick" in interest rates would help our market. There is a large "pent up" demand of buyers, but they are content to sit on the side lines and wait. For the last 24 months, there has been no penalty for waiting. Prices & interest rates continue downward or flat. An increase might convince those buyers to take advantage of the rates BEFORE any additional increases.

Mar 02, 2012 10:32 PM
David Monsour
Keller Williams Keystone Realty - Gettysburg, PA
ABR - www.realty-insights.com

The penalty will be to the sellers if rates tick up.  Less purchasing power will push prices down further.  It's a slippery slope.

Mar 19, 2012 12:58 AM