Early in their career, the Rolling Stones had a hit song “Time in on your side”. In the ballad Mick croons that if you just wait, things will work out. This may not be the case if you are a 1st time home buyer or a home owner that needs to make a move.The assumption is that mortgage rates, which are ridiculously low compared to historical standards, will remain at this level or even go lower. As a result, you may think you can take your own sweet time and the deal will only get better.
HELLO! You are not buying a flat screen TV where prices have been driven down by improvements in manufacturing and greater supply. You are buying a home, and for most people it is bought by borrowing money in the form of a mortgage.
Right now home buyers have an unprecedented opportunity to buy a home with mortgage rates hovering around 6%. If your last name is Rockefeller or you have an Uncle Loey who will lend you the dough at 4% as long as you don’t report it on your taxes, go play some wWii bowling otherwise you need to sit up and take notice.
When we manage to navigate our way out of this financial quagmire mortgage rates are predicted to go up. The current low mortgage rates are there to stimulate sales in the housing sector. The housing sector provides jobs directly or indirectly to many parts of our economy; when it’s sick, the entire economy is sick. Once the heath of the housing sector improves, the smart money is that Mr. Bernanke and his trusty crew will raise interest rates to keep inflation in check.
There is one school of thought that if the Chinese stop buying our US Treasury Bonds that rates would increase DRAMATICALLY! Checkout my Friday post for a great insightful video.
Wayne
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