Yahoo Finance Writes: 4 Reasons You Shouldn’t Worry Over Rising Mortgage Rate
An amazing puff piece from the Real Estate Industry. Please see my comments below. Also, please note that I have called for the Real Estate top back in early October of 2013. You can see it here. I Am Calling For A Real Estate Top Here. I am still sticking to that forecast. The market is already rolling over, although, a little bit slower.
If buying a new home is on your list of goals in the New Year, don’t let talk of rising mortgage rates derail your plans just yet.
As the economy recovers, the Federal Reserve tapers, and home values rise, experts predict we are well on our way to seeing mortgage rates crack 5% in late 2014.
Rates for a 30-year fixed-rate mortgages already hit 4.69% this week, up from 4.63% the week prior, according Bankrate.com. In May, the 30-year rate was 3.52%. Fifteen-year fixed mortgages were up as well, from 3.70% last week to 3.73% this week.
But rising rates don’t necessarily spell doom for house hunters. Here are four big reasons not to worry.
1. Mortgage rates are getting higher but not drastically so.
“I don’t think there’s any reason to panic,” says Keith Gumbinger, vice president of mortgage rate tracker HSH.com. “Buying a home will be somewhat more expensive, but I don’t think it’s going to be a matter of ‘Oh, I’m losing so much ground that I have to go out and buy [a home] right now.’”
Historical context is important. A little over a decade ago, the lowest average rate for a 30-year fixed rate mortgage was around 5.24%, Gumbinger notes. It’s easy to forget that when rates fell so dramatically following the housing crash.
“Even if we do start to see 5% rates appearing in 2014, rates will absolutely remain favorable [to buyers],” he says.
When someone in the industry says “I don’t think there’s any reason to panic”, you MUST panic. While in historic terms rates are still low they are still up over 100% in the last 1.5 years. That is a huge move within a short period of time and it will take its toll. It is already happening. Don’t let anyone fool you that it doesn’t matter.
2. Housing inventory is on the rise.
Nationwide home values have soared over the last year, with year-over-year gains of 13.6%, according to the Dec. 31 S&P/Case-Shiller Home Price Indices. That marks a seven-year high and the 17th consecutive monthly increase.
But new-home construction has picked up in the last few months and is expected to ramp up more, which should help lift supply. New housing starts were up 30% year-over-year in November 2013, according to the Commerce Department. On top of that, more homeowners will likely sell this year to capitalize on rising home values, contributing to an inventory boost.
I am not sure how this positive for the housing market, but they are absolutely correct. There is too much inventory out there. Too much hidden inventory for that matter, still sitting on bank balance sheets. Eventually all of that will come to the market and drive the prices lower.
3. There will be less competition from investors.
Real estate investors were notoriously greedy in the wake of the housing crash, snatching up cheap properties and elbowing out individual home buyers before they knew what hit them. But Jed Kolko, chief economist for Trulia, predicts that competition from investors will die down now that the market is recovering.
Last year “was the year of the investor, but 2014 will be the year of the repeat home buyer,” he says.“Investors buy less as prices rise. Higher prices mean that the return on investment falls, and there’s less room for future price appreciation.”
In other words, the author wants retail buyers to come in and purchase inventory from investors before market declines. This occurs in the stock market all the time. Again, I am not sure how this is a positive for the real estate sector. It predicts its inevitable decline. Don’t be that FOOL buying from investors at or near the top.
4. Fed tapering isn’t all bad news.
All eyes are now on Janet Yellen, the incoming Federal Reserve chairman who will be charged with phasing out the bond-buying program that has helped to steady interest rates over the last five years. It will be a delicate process. If Yellen moves too quickly, investors could get spooked and send mortgage rates soaring, notes Bloomberg’s Kathleen Howley. If she moves too slowly, rates could fall and the market could get flooded with home buyers.
But there’s a silver lining, Gumbinger points out: “Mortgage rates have started to firm up again not strictly because the Fed has started to taper but because the economy has gotten better,” he says. The fact that they’re considering winding down quantitative easing is a sign that the sluggish economic recovery is at least making some headway.
You joking, right? The economy has NOT gotten better. It has gotten sicker. A distinction must be made between real economic growth and a “drunken” credit driven speculative party. What we have seen over the last few years is the later. When it comes to an end in 2014 (based on my timing work) and the bear market resumes, this will be made very clear. Again, this is a horrible position to be in for the real estate market. As I have said many times before, the 3rd leg of the real estate decline will be a severe one. Position yourself now.
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4 Scary Reasons You Should Run Away From Real Estate…..Right Now!