Some comments from a local real estate agent’s recent newsletter. For your reading enjoyment (the last paragraph in particular):
“In recent weeks, interest rates have climbed sharply. Now 30-year fixed rate mortgages, which were hovering around 6%, have jumped to almost 7% in just a few weeks. Rates are currently the highest they have been in the past ten months.
I don’t profess to be an economics expert. However, from what I read in the Wall Street Journal, this is all related to a dramatic drop in the bond market and hikes in interest rates in several foreign countries.
Apparently new home builders saw this coming because they started reducing prices or offering incentives to reduce their inventory a couple of months ago. As a result, new home sales have been at a record pace recently while home resales have been sluggish.
Another side effect of the bond market slump is that the interest rates on existing adjustable rate mortgages are spiking. For example, a homeowner who took $500,000 adjustable rate loan two years ago might find his or her payments increased by $900 per month.
Some experts have predicted for a long time that the low interest rates would not last forever. They say it would not be surprising to see mortgage interest rates in the 8-9% range in the not-too-distant future.
What does this mean for prospective home buyers and sellers? Well, if I intended to purchase a home, I’d do it before interest rates climb any further. And, if I wanted to sell my home, I’d get it on the market before too many buyers are no longer able to qualify for a loan with higher mortgage interest rates.”
