Historic Interest Rates won’t be here forever
Today we share with you an article that senior vice president and managing
officer of Intero, Alain Pinel wrote entitled, If
The Interest Rates Were Going Back Up Soon? Last week we posted a companion
piece of Mr. Pinel’s speaking to Sellers and their hesitation with listing their
homes. This weeks article speaks to the fact: interest rates won’t remain
this low for much longer. A lot of Buyers are already struggling to find their
dream home because of the minimal inventory-but if you’re thinking you can wait
out the frenzy and that the interest rates will be the same you may be out of
luck! If you’re thinking about buying a home in the Silicon Valley reach out to
us, we can help!
“I don’t mean to scare anybody, just merely bring all of us back to reality. Let’s face it, good things don’t last forever. Sooner or later, mortgage financing will be more expensive. From all indications, this may happen sooner than later.
Remember where we are coming from and where we are today. Back in the dark days of the recession, the Fed did what it was supposed to do. It pushed interest rates down and down again to stimulate an anemic economy that did not know which way to go. The combination of record low rates and record low prices brought more buyers to open houses and real estate offices. It worked. Not as much as I thought it would, but it worked, finally. We had a good year last year and 2013 looks even better.
There is nothing like momentum. Optimism keeps on feeding on itself. Here we are, today, going through the Sequester saga and watching Europe self-destruct in the name of unity….And we are… OK, as if oblivious to bad news. That’s our character. That’s our strength. What a blessing it is!
Having said that, we need to wake up and think about what would happen if interest rates were to start going the other way. As we said earlier, things are looking pretty good now. The Dow has set historical highs lately, we are now adding private sector jobs at a good pace, the dollar is rising against the euro & the yen, and jumbo mortgages are still around 4% or better!…… As my pharmacist told me a few weeks ago, we take medicine to cure a cold, but when the cold is gone, it is time to stop since it would otherwise be counter-productive and produce undesirable side effects…
OK, the economy may be a bit more complicated than a bad cold, although I am not so sure. In any case, we are due for a change. The question is not if or even what, the question is when. The Fed officials are scheduled to meet later this month. I bet they will be divided in between those who want to see more sustained growth and better job numbers before pulling away from easy-money policies…And those who argue that, now that the recovery is underway, easy-money can cause more problems than it can solve. This time around, the “show me more growth first” will win, but for how long?
The real estate business is as good as we have seen it in years. Buyers are working full-time trying to find a home and, when they do, trying to beat other anxious would-be buyers to the finish line to claim the win and the house. As we now have said for about a year, the only thing missing is enough inventory to satisfy the growing demand. We need twice as many listings at a time when they are down, nationally, almost 20%! Go figure!
I don’t know what impact, if any, rising interest rates will have on the market activity when it happens, but why wait? Buyers would rather not. As for sellers, it seems to me that the timing is pretty good now to bring a property to market. I realize that some sellers are of the opinion that waiting a while longer will yield them a better return in a hot market, but a lot of sellers got burned just a few years ago with that same expectation. In a still fragile economy, it may be better to deal with today’s attractive realities than gamble on tomorrow’s shiny promises.”
“I don’t mean to scare anybody, just merely bring all of us back to reality. Let’s face it, good things don’t last forever. Sooner or later, mortgage financing will be more expensive. From all indications, this may happen sooner than later.
Remember where we are coming from and where we are today. Back in the dark days of the recession, the Fed did what it was supposed to do. It pushed interest rates down and down again to stimulate an anemic economy that did not know which way to go. The combination of record low rates and record low prices brought more buyers to open houses and real estate offices. It worked. Not as much as I thought it would, but it worked, finally. We had a good year last year and 2013 looks even better.
There is nothing like momentum. Optimism keeps on feeding on itself. Here we are, today, going through the Sequester saga and watching Europe self-destruct in the name of unity….And we are… OK, as if oblivious to bad news. That’s our character. That’s our strength. What a blessing it is!
Having said that, we need to wake up and think about what would happen if interest rates were to start going the other way. As we said earlier, things are looking pretty good now. The Dow has set historical highs lately, we are now adding private sector jobs at a good pace, the dollar is rising against the euro & the yen, and jumbo mortgages are still around 4% or better!…… As my pharmacist told me a few weeks ago, we take medicine to cure a cold, but when the cold is gone, it is time to stop since it would otherwise be counter-productive and produce undesirable side effects…
OK, the economy may be a bit more complicated than a bad cold, although I am not so sure. In any case, we are due for a change. The question is not if or even what, the question is when. The Fed officials are scheduled to meet later this month. I bet they will be divided in between those who want to see more sustained growth and better job numbers before pulling away from easy-money policies…And those who argue that, now that the recovery is underway, easy-money can cause more problems than it can solve. This time around, the “show me more growth first” will win, but for how long?
The real estate business is as good as we have seen it in years. Buyers are working full-time trying to find a home and, when they do, trying to beat other anxious would-be buyers to the finish line to claim the win and the house. As we now have said for about a year, the only thing missing is enough inventory to satisfy the growing demand. We need twice as many listings at a time when they are down, nationally, almost 20%! Go figure!
I don’t know what impact, if any, rising interest rates will have on the market activity when it happens, but why wait? Buyers would rather not. As for sellers, it seems to me that the timing is pretty good now to bring a property to market. I realize that some sellers are of the opinion that waiting a while longer will yield them a better return in a hot market, but a lot of sellers got burned just a few years ago with that same expectation. In a still fragile economy, it may be better to deal with today’s attractive realities than gamble on tomorrow’s shiny promises.”
This blog is courtesy of The Dawn Thomas Team who is an
award-winning Real Estate Agent team at Intero Real Estate Services in Los Altos
650-701-7822. We help nice people with selling and buying homes from Palo Alto
to West San Jose!
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