On the Road to Higher Interest Rates?

On the Road to Higher Interest Rates?

You know all the cliches about interest rates and home prices and the “affordability index”.  As overused as they are 9892678_sand as desensitized as we have become, they have never been more true.  You’ve also undoubtedly heard the recent chatter about the improving economy.  A long awaited and much needed return to more prosperous times.  Possibly the only real downside to an economic upturn is the detrimental effect on that “historic affordability index”.  Rising interest rates and home prices will undoubtably make a home purchase more difficult to obtain.  Much how we were kicking ourselves the last several years for not recognizing the real estate “bubble”, many of us will soon be regretting our failure to get off the proverbial fence and take advantage of an opportunity that we will likely never see again.  Robert Saltzman with Academy Mortgage sums it up well in this installment of his weekly newsletter.  You can reach Bob any time to learn more about financing a home and you can reach me any time to help you find the right home for you.

All the best!

Chris Henry

Terms of Enrichment

Yesterday was a big data day for the national economy.  A quarter million or so new jobs brought the unemployment rate to a 4 year low of 7.7%.   That’s a national number, not a state of Florida number (Florida’s January number is due out later this month), but it’s likely Florida will somewhat mirror the national results.

For the purposes of this newsletter, however, the Florida number is not particularly important.  The reason is that my subject is what national economic recovery means to us involved in real estate.  With each tick up in employment, as well as the stock market, the closer we get to the Fed pulling away the low rate punch bowl.

We’ve lived in the intoxicating fog of Fed stimulus for so long  that it’s easy to forget that our interest rate environment is somewhat artificial.  The Fed is spending big to ensure recovery by buying 85 billion in mortgage backed securities per month.

Called “QE” for Quantitative Easing, the Fed’s stimulative policy is a major reason for the low rates we’ve enjoyed and benefited from.  While one month’s strong jobs number does not threaten immediate end the to the low rate punch party, every reminder that it’s coming take it’s toll on current rates.

Rising rates in the face of stagnant wages mean lower housing affordability.  Consider that a 200k monthly P&I is $870/MO at 3.25%.  Bump the rate 2 points to a still historically attractive 5.25%, and  the payment goes to $1,104., reducing the pool of qualified buyers for that home.

Couple that to rising insurance rates (even before a house literally swallowed one of our residents), and you get the feeling that all indicators point to more expensive housing costs.

Will Rogers famously said:  “Don’t wait to invest in real estate, invest in real estate and wait.”     My thought is:  Don’t wait for a better market.  Market better now and prosper.  Okay, so I’m no will Rogers, but you get my point!

Best,

Bob

PS:  Speaking of marketing,  I know of no lower rates or turn times anywhere than those of Everbank.  I’m getting lots of calls on our jumbo 30 year fixed rate which unusually is the same as our conforming Fannie rate! 

Bob Saltzman

813 787-7711

robert.saltzman@everbank.com

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Chris Henry