Welcome to my spot on the web. For all you buyers in Baltimore I hope this little spot will help educate you while you house hunt. Today I wanted to discuss why rates have climbed so much in the past week. Many banks and brokers are now over 6% for a 30 year fixed.
The reason this is happening is because of the bond market. the bond market is basically now starting to ignore the FED. Usually mortgage rates drop when the FED drops rates. This for the time being has changed.
The bond market however is a smart bunch and they are now worried that home prices might drop on a national basis. If you want to see where rates are heading you need to watch CNBC and look at the 10 year rate. There was a massive spike upwards this week in the 10 year which has resulted in a big jump in interest rates. So in closing look at the 10 year when you are trying to predict where rates will go.
I expect housing to drop 30-40% based on the change of lending standards in combination of higher interest rates. As a result I recommend anyone that is looking for a home to wait at least another year.
4 comments:
Jeff,
Lets chat via email...maybe you could come join Adam and I over at our blog. I'll have to talk it over with Adam though.
-Kevin
kevin
Maybe we can both work together. You guys have the real estate info that I don't have time to research. I am a finacial guy who can explain why housing is dropping.
I love your blog and I check it every week. Maybe we can link each other together? I think the combination of both of our blogs will help people make good decisions. Feel free to e-mail me at any time. I am just brainstorming here.
If you think interest rates are going up and the price of homes are going down, isn't that a wash? For every percent it goes up a year from now, you have to pay $10 extra per every $10,000 you borrow.
So a 300K home at 5% now is $1600 per month, if that same home drops to 250K a year from now and rates go to 7%, you have to pay $1650 for that same house. Yeah you got it cheaper, but your payment is higher. Sounds like you should buy now while you know rates are low.
Real estate
It all depends on how much money you have to put down. People that have 20% or more to put down will do much better with cheaper prices.
The savers who stayed away from the bubble or sold at the top will have much lower housing payments if prices come down.
Your are accurate assuming everyone puts down 5%. this is not the case.
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