The chief financial analyst of Freddie Mac, Frank Nothaft, predicts the 4.25% interest rates we had in November of 2010 are history. Rates are in the 4.75% range right now (March 2011). Nothaft predicts that by the time we reach the end of 2011, rates will climb to at least 5.5% and in 2012, will be over 6%!
What this means for homebuyers…
Let’s paint two pictures:
1) A loan of $417,000 @ 4.75% for 30 years…
2) A loan of $417,000 @ 6% in 2012 for 30 years…
So, you'd need a 15% pay increase in one year in order to be able to buy the same priced home!
Another way of looking at it...
If the rate goes up 1%, your buying power goes down by 11%.
For example, the payment on a $500k property, loan amount of $400k, at a 4.5% rate, is the same as the payment on a purchase of a $445k property at 5.5% (loan amount of $356k).
Increase your purchasing power…………… BUY NOW!
What this means for homesellers: Buyers will be able to pay more for your house today than they will in a year………… SO SELL NOW!
30 yr fixed rates have ranged as high as 18.5% during the past 4 decades. Here are the average 30 yr rates for each of the last 4 decades, putting 2010 and today's rates in perspective:
1970's - 9.03% avg.
1980's - 12.5% avg.
1990's - 8.12% avg.
2000's - 6.92% avg.
2010 - 4.69% avg.
The average over the last 4 decades (1970 through 2009) has been 8.97%. Buyers should understand what a bargain 4.75% (today) really is. This alone is ample reason to get off the fence!
Email Us