Financial markets have been on hold for the past week as a result of across the board uncertainty about the US and global economies. We've seen mortgage rates slide almost 1/2% over the course of the last month and movement that big is in and of itself reason to avoid the "wait and see if things go lower" approach. Further downward movement in rates (or upward movement in price of mortgage bonds) would require some new fuel. (Weaker than expected economic data, Europe being repossessed.....etc., some additional catalyst would be needed to further push mortgage rates down.
We'll see where things go but I'm locking loans right now at rates that make it hard to argue against moving forward with a transaction be it a refinance if you haven't already, a first time home purchase, or making the jump to more square footage that you either already need but have been hesitant to pull the trigger on or on the upgrade you know you will need in the next few years. I can assure you a lot of people out there will be making an upgrade purchase 3 years down the road and will say to themselves "I REALLY should have done this in 2011 when rates were so low and this house I'm buying for $300,000 could have been had at $260,000...would have saved a lot of money...." I promise that will be frequently uttered in the coming years.
Big booms are always followed by big busts.....just look at the last few years. The flip side of that is also true though, busts are always followed by a smaller boom. It's the way the market does and always has worked. So that said, if we've seen a 14% drop (pulling that out of the air, all markets are unique to themselves so it's pointless to put a factually accurate number on it, this is more for example.) But lets say home prices are down 14% over the last 2 years, the inevitable flip side will be a period of rapid appreciation to "catch back up to" the average. It will happen, that's for sure. What isn't sure is the "when" part of that. To take that one step further, the recovery of housing will be coupled with and caused by a recovery in the overall economy and more importantly with a recovery in the unemployment numbers. Economic rebound + more people working + more money being made = More money being spent. That leads inevitably to inflation concerns and therefore to increased interest rates. So to summarize this point, not only in my scenario of the "2014 Home buyer making the upgrade purchase" will they be paying a sales price based on a hyper-appreciation market to balance out with our recent decline, the very nature of why that will be will also mean an interest rate of 7% as opposed to 4.75%.....so the money will be more expensive and it will require more of it. Do that math and you'll see a number larger than most peoples salary in the form of short term savings. With college to pay for, retirement to plan for, whatever your case is, I can't think of anyone I know that would prefer to spend exponentially larger amounts of money when they have the option not to.
Sometimes it makes so much sense, that no one seems to get it!
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