Metro Detroit

RATES

September 18, 2015

This meme may not be entirely accurate (maybe he did buy a beach home last week, I wouldn’t know), but Mitt does own 6 homes that we know of.  Good for him.

If you’re like the rest of us, you may have had your eye on the Fed’s decision yesterday and the unexpected outcome.  Interest rates matter to people like us.  Most analysts anticipated an uptick in the federal funds rate because they believe the economy has strong fundamentals.  Well, they were wrong.  The fed left rates unchanged, and likely did so to keep this fragile economy going at a decent clip.  More info here.

Now the talk is about next month and what the fed will do.  And Q1 of 2016, Q2, etc.  Most, again, anticipate rates rising slightly but in my humble opinion I don’t think they will.  Not for an extremely long time.  Rates staying low has serious implications for buyers currently in the market for a new home.

Here’s the beef:

Monthly payments will continue to be low, keeping affordability levels high while enabling people with relatively decent incomes to afford bigger, newer homes.  Mortgage approvals are based on the ability to keep up with monthly payments, not total price.  The combination of extremely low rates and moderate valuations creates a good recipe for buyers to jump in.

Act fast, though, because low rates means prices will continue to rise.  Cheap money, overall inflation (building materials, etc.), and extremely low inventory levels create the perfect storm for quickly rising prices and difficulty for buyers to enter the marketplace.  Moreover, land prices are skyrocketing.  Builders simply can’t make more of it.  Expensive land = expensive homes.  This can be good and bad, depending on what side of the coin you’re on and which real estate company you choose to work with.

Navigating this market is tough; when it comes to getting your offer accepted and selecting the best financing for your home, work with the New Home Experts – we tackle this stuff every day!

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