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Will Interest Rates Rise?

“Will interest rates rise?”

This is a common question at every holiday party, especially for those considering buying a Glendale, CA home.  The short answer is, “yes”, and the reason is wrapped up in the word, “Taper”.

What is Taper?

Taper

The term “Taper” has been in the news, a lot, lately.  This term refers to the idea that the US Government is going to start pulling back on their economic stimulus package.  This means they will decrease the purchase of binds… and that purchase is what kept the interest rates low.

Here is a chart showing interest rates during 2013, PRIOR to this pull back of bond buying:

Interest Rates

Now, these are interest rates were recorded WHILE the government was buying bonds to keep rates low.  I think the dip we experienced at the beginning of fourth quarter made people feel that lower rates were on the way.  However, the taper is coming, and, when it does, interest rates will go up.

When will the Taper happen?

 

Quote

This is from our friends over at caluculatedriskblog.com; they’re quoted in the Wall Street Journal, they’re quote in the New York Times, one of the chief economists in the country that takes a look at things. I tend to believe they know a tad more than I do about the doing of governments.

All righty, then.  The taper is happening, and it is happening soon.

Where will the interest rates go?

 

Rate ProjectionsIf we take  a  look  at the mortgage rate  projections  by the four major  analysts  ‐  Fannie Mae, the National Association of Realtors, Freddie Mac, and the Mortgage Bankers Association if we average all of their numbers together, they believe that this time next year interest rates will be over five percent.

Now, let me just bring this home for you (Get it? Bring this HOME?  *snerk*).

What does a one percent rise in interest mean in cold, hard, cash?

 

Cost of Waiting

This chart was developed by a real estate economics blog powerhouse that I subscribe to.  However, they are based in Chicago where home prices are not nearly what we experience out here with Glendale, CA Homes.  A more common (and somewhat low) mortgage amount for us is $500,000.  This means waiting until next year could cost you over $300 per month/$3600 per year. And, that is only if the price of homes remains stable.

Yikes!!!  What do I do?

I am glad you asked.  Here is a simple action plan that will help you get a jump on all the other eager buyers.  If you start now you could be in a sweet house, lining the shelves in your kitchen, while all your friends are moaning that they have been priced out of the market.

  1. Take this “down” time over the holidays to think about what you want from a home.  Make a list.
  2. Cruise through the neighborhood sections on this blog.  Descriptions, pictures and active lists of current inventory in that area will help you decide where you want to go.
  3. Contact a mortgage professional for pre approval.  Here’s a great article on the Strategy for Buying a Home in Glendale
  4. Interview Realtors.  Here’s a great article on “Do you Need a Realtor?”

As always, we at DIGGS are delighted to help.  Feel free to call, write or send smoke signals.  We are here to serve.

 

About Kendyl Young

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