“I’m waiting for home prices to fall more. Interest rates are going down. Please call me when the market hits the bottom.”
"Hello, This is your call."
Can I predict the future? No! But I called the market top in October, 2005 (not the exact top, but pretty darn close). How can I do this? By watching the shift in market indicators and their derivatives, you can peak behind the curtain and stay out of trouble.
Truthfully, no one knows exactly where the bottom is, but we will all know once it has passed. By then, it will be too late. Remember, the masses are always wrong at market tops and bottoms. So, the plan to follow the masses is a guaranteed loser. . .
It is an exciting time and a time of great opportunity. I think we will see a bottom to the market in 2008, a stabilizing of the market in 2009 and a move up in values in 2010. I could be wrong, but that is what I am seeing...but the time to take action is now, with rates slowly climbing."
Interest Rates are rising but still historically low
Everyone is focused on the news – The Fed lowered the Fed Funds Rate. The misinformed masses believe that 30 yr fixed mortgages are falling because of this. They are dead wrong.
The following chart is from http://www.bankrate.com/
For weeks, I’ve been warning my clients that interest rates are a huge factor in the affordability of a home and they are at historical lows. We’ve seen a nearly ¾ percent increase in interest rates in just six weeks. That sounds innocent enough.
But this ¾ percent rise in interest rates translates to nearly a 15% increase in your mortgage payment. Your $1400/mo mortgage payment just became $1610/mo.
While everyone is focused on trying to find the exact bottom of home prices, they’ve lost
sight that a whole years worth of declines can be wiped out in a few weeks – by a seemingly small shift in interest rates. It took all of 2006 for home prices to drop 12% in Baldwin County, but in just six weeks that advantage to buyers was entirely erased by the interest rate increase.
Many buyers who are looking at prices could be priced out of the market by a rise in interest rates. Remember it is home price plus interest rate that determines your house payment and affordability.
Now let’s take a look at the big picture
Interest rates were over 14% in 1981. Look how many years rates stayed above 6%. We have seen a gradual rise in interest rates since 2003. The risk of rising interest rates looms large when you look at this historical graph. And because interest rates are so low now – a small shift could have a big impact (as a percentage increase in your house payment).
We sincerely hope you don’t miss this unique window-of-time to obtain your affordable home. Keep in mind that Tami Roberts and her team at MyFavoriteAgent.com know where the nicest bank-owned homes are and how to buy them for the lowest possible price. Visit us online at http://www.myfavoriteagent.com/ or http://www.gulfshoresvalue.com/
By Tami Roberts, Broker & Author
Disclaimer: While no one knows the exact bottom of the market in real-time. We are presenting the facts as we see them. We will all clearly see the bottom, a few years after the fact. But how does that help you? The opinion is ours and we want to share our thoughts with you. This is not a guarantee that the market will behave as we believe it will.
