Focus On Interest Rates

Hey, I'm finally getting around to doing that interest rate post! I had taken a look at this earlier this year, and much to my surprise, rates got even better since then. It's just unreal - take a look at this chart.

Back in February when I last posted about this, rates were in the 5% range. From an historic perspective, that's an unbelievably low rate. Since then, a number of things have happened on a macroeconomic level - most of which are way above my level of understanding - and rates fell into the low 4's. It seems in recent weeks that we've started to see a little bit of movement upward. We were looking at 4-4.125% for a little while there, but now we're bouncing around the 4.375% level on FHA/VA loans.

I've been talking to a lot of folks who bought in the last couple of years, and some of them are either thinking about or have done a refinance on their homes to get a better rate. There's a whole calculation to whether or not it's worth doing. Some of it depends on how long you plan on staying in that loan, and some of it depends on your equity position. But you could save a nice little chunk of change every month. On a $200,000 loan, a 1% difference is $2000 per year, or around $167 per month. That's a big difference in a lot of people's household budget.

I'm actually a little surprised that we don't have more first time buyer activity in our market than we do right now. Sure, the tax credits expired. So what? Everything is on sale, and money is cheaper than it's ever been in my lifetime. I seriously doubt that those tax credits are coming back any time soon. And interest rates in the low 4's - are people seriously going to let that slip away? I think that 10 years from now, a lot of the discussions that people will be having about real estate will center on one of these two points: "I'm really glad that I bought a house ten years ago" or "I really wish I'd bought a house ten years ago".

I know there are a lot of people who have been hammered by this economy and simply can't do anything right now. But there are also a lot of folks who can do something now, but are afraid. I get that, I really do. I bought my first home in 1992. For those of you who don't remember that time frame, we were in a recession, unemployment was high and getting higher (does that sound familiar?). How bad was that economy? We elected Bill Clinton over a sitting incumbent despite a sex scandal during the primaries. Let that soak in for a minute... We had just had a pretty brutal round of layoffs at my place of employment. Was I scared? Hell yes! But I acted anyway, and to this day I'm glad I did. A wise man once said in a song lyric "We can live in fear or act out of hope" (John Hiatt, one of my favorites). I would encourage you to act out of hope.