Tag Archives: federal reserve

What Happened To "Low" Interest Rates?

A lot of buyers have been caught off-guard over the past month with the spike in mortgage interest rates. All of a sudden (or so it seems), 30-year conforming loans have jumped from the mid- to high three-percent range to the high four-percent range.

 

What’s going on? It’s pretty straightforward and simple – the Federal Reserve announced it is planning to stop or curtail the Quantitative Easing (QE) program that has flooded the U.S. bond market with cheap money over the past four years. The actual curtailment won’t start till later this year, but the market has already reacted with a loud roar!

 

The reaction has been predictable – lots of angst and crying, “Oh, woe is me! I missed the gravy train!”

 

I wish I had the magic words to make you feel better, but I don’t. Sooner or later this had to happen. But it’s not the end of the world. When I got into this business ten years ago, interest rates were in the mid seven percent range, and everyone was commenting about how “cheap” mortgage interest rates were, compared to 10 or 20 years ago. Then we got REALLY spoiled as they began to spiral down to the mid three percent range. But just like everything else in a market-based economy, sooner or later what goes down must inevitably come back up.

 

I had the privilege of attending a presentation yesterday (Wednesday, July 10) made by Dr. Mark Dotzour, Chief Economist for the Texas A&M Real Estate Research Center. Dr. Dotzour is one of the most highly respected real-estate economists in the country, maybe even the world. Indeed, the entire A&M Center is regarded as one of the best of its kind anywhere. Here’s the long and short of it – the glory days of sub-four-percent 30-year rates is over, and likely won’t return in our lifetimes.

 

Say it ain’t so! I wish I could. But here’s the GREAT news out of all this – we’re still buying homes with outrageously cheap money. Yes, we’ll probably be in the five-percent range sometime in the next few months, but so what?!? The world is not coming to an end – just a bumpy stretch in the road. I guarantee that anyone who’s sitting on the sidelines saying, “I’m gonna wait for those rates to come back down” is going to be waiting for a long, long time.

 

All of this leads to one obvious conclusion – NOW is the best time to buy (or sell) a home. With that in mind, why not give me a call?