“The Two-Headed Monster”

If you are not planning on changing homes, you can go straight to the sports section now. However, if you haven’t noticed or haven’t paid any attention to what a lot of people including me have been saying for some time, you might want to read on.

An author named Greg Rand wrote a book back in 2011 titled “Crash Boom!” The book spoke of the coming fortunes to be made in real estate for those with the resources and intelligence to invest, which at that time was to most like a fireman running into a burning building when everyone else was running out.

In a nutshell, he said that the glut of homes on the market back then would be absorbed by investors who would then rent to those who lost their homes to foreclosure. Interest rates were rock bottom. It was a contrarian approach to the problem, and it happened. No one was building new homes, and everyone has to be somewhere. We were saying back then that if you wanted to buy a home, the timing couldn’t be better, and buyers were swaggering around making ridiculous offers that were accepted by desperate sellers. Life was bliss for buyers and hell for sellers.

Fast forward to now. All those events led to the inventory shortage we have today. Here today, gone tomorrow … a knife that cuts both ways. The economy is a two-headed monster. One head is a beautiful lady singing the siren’s sweet song, and the other a fire breathing dragon scorching the earth. We wanted homes to bring higher prices, and because of shorter supply and higher demand, prices increased. Likely the increase was faster that your paycheck enjoyed.

Now comes the generation that believes they are eternally entitled to 3.5% mortgage rates because that’s the way it’s been all their adult lives. When the peanut farmer was president, mortgage rates were higher than credit cards! These charts may help wake you out of the dream.

The forecast shows that mortgage rates are heading toward 5% by the year end.

2018 Mortgage Rates

This illustration shows that both fixed and adjustable rates are the highest now that they’ve been. The stock market is setting record highs, the economy is expanding, and there is talk of more money in coming paychecks. All that fuels inflation, and initiates the Federal Reserve to expand interest rates as a counter measure. That means that if you are approved for a $200,000 mortgage at 4% interest, and the rate goes to 4.4%, your payment goes from $955 to $1127 for the same home. If you say you can’t afford that house payment, you get to buy a house that $955 can cover, meaning less home for the money.

Like I said at the beginning, if you want to buy a home, you need to get serious now. If you don’t want to buy one, HOW ‘BOUT THEM DOGS!