* You’ll learn why a rising Fed Funds rate doesn’t necessarily mean rising mortgage rates.
* The main determinants of buying a home.
* Where we are in the property market cycle.
* You can always refinance. You can never change the purchase price of your home.
* Mortgage rates and the 10-year yield have spiked higher post Donald Trump victory due to the perception that Donald will cut taxes, increase tariffs, boost government spending, that will put upward pressure on inflation. The 10-year yield is what determines mortgage rates.
Now that the Fed is raising interest rates (3X forecast for 2017), you are hearing everybody from real estate brokers to market pundits in the media say, “Buy now before it’s too late!” There’s nothing like a little Fear Of Missing Out to get people to make big decisions without thoroughly thinking things through.
The instant response everybody should have when fed this line is: Don’t higher interest rates make homes less affordable at the margin? If homes are less affordable, doesn’t that hurt property demand? And if demand for property declines, doesn’t that mean prices might go down instead?
Whenever you are talking to someone whose main source of income is through transactions, be a little suspicious. After all, from a real estate broker’s point of view, it’s always a good time to buy or sell!
This post aims to explain how to think about a home purchase (or sale) in a rising interest rate environment. We’ve already discovered how to invest and potentially profit in the stock market when rates rise.
My hope is that this post educates future homebuyers, reduces the number of future debt welchers, and creates a stronger America as a result!