These past few months, there’s no way you could turn on the radio or television and NOT hear or see someone talking about the Fed and whether they were going to raise the funds rate (of course they will).
What the Fed does with the funds rate DOES have an effect on all of us, sure, but it’s not as severe as you might think: • From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25% - sounds pretty dire, right? • In that same period, the mortgage rate rose from – are you ready for this – 6% to 6.75% As I write this, the Fed funds rate is .5%, and the projections by the Fed indicate that by September 2017, that rate will be at 2.6% – that’s about half of the Fed’s increase in the May 2004 to July 2007 period indicated above. In the words of David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices (he must have really big business cards to fit that title on them), “These data suggest that potential home buyers need not fear runaway mortgage interest rates.” While we all want to give Davey a nice warm hug, there is a bit of urgency that I would like to inject into the conversation here – and I’ll keep it in plain English, I promise. Over the past year, home prices have averaged an increase of about 5%, which means a $200,000 house is now selling for $210,000 – and the prices are projected to increase by another 5% this coming year. So, according to Mr. Blitzer, you don’t have to buy TODAY to make sure the rates are reasonable, but you should start looking now. Every $10,000 increase in a 30-year mortgage, is about a $50/ month increase in the payment – that’s $600/year.
Thinking about buying and looking for an experience buyers agent? Give me a call, Spirit