Mike hit it in the head. If you are looking for a house, rates are NOT going to stay here forever.
DON'T WAIT. CALL YOUR REALTOR NOW!
It had to happen. The New York Times news alert headline says Federal Reserve Raises Interest Rate Charged to Banks, In First Move Since 2008.
Is it a big deal? That remains to be seen. If you locked your loan yesterday, be happy. The rate you got isn't available today.
An Example From History
(You can't call it a lesson unless something has been learned...)To put things in perspective, when Jimmy Carter defeated Gerald Ford in 1976, the discount rate stood at 5.25%. Two years prior, under Nixon, it had been higher, at 8%. Commodity prices were through the roof. (Google "oil prices 1973.") Inflation had taken hold, and the Federal Reserve decided that enough was enough.
The Fed started raising the Discount Rate to combat inflation.
In four short years, the discount rate rose from 5.25% to a staggering 13.00%. Remember that the discount rate is the rate banks pay to borrow the money they lend to you. You pay more.
What did that mean to consumers? I was a homebuilder in the 1980's. My buyers back then had first mortgages as high as 17%. (And we still sold new homes at the Jersey Shore.) Second mortgages were available at 21.5%.
Parallel to today...
Nixon was winding down the Vietnam war, and bringing home the troops. The NY Times headline on March 29th (the day the last of the US forces were out of Vietnam) was Nixon Sets Meat Price Ceilings at Both Wholesale and Retail; Asserts Costs 'Should Go Down'.
Congress was trying to force an outcome on the free market.
The result was inflation.
Rates had to go up to kill the monster, and economic results of the next decade were a template for for our current dilemma.Moral of the story?
If you intend to finance the purchase of a home, better do it now! I recommend a 30 year fixed rate.
p.s. If you intend to qualify for the $8,000 first time homebuyer tax credit or the $6,500 credit, you must be in escrow by April 30.
Call your REALTOR now.
___________________
I'm Mike in Tucson, your preferred Tucson Mortgage Lender.
NMLS #223495
SUNSTREET MORTGAGE llc ~ Mortgage Bankers, Not Brokers!
Offices in Scottsdale, Tucson, and Nogales, AZ, and Albuquerque, NM.Call me on my Blackberry (520) 349-9090
photo courtesy Kevin Chauvin, Flickr
Unless otherwise noted, all content of this blog is the property of Lane Bailey, ©2012 Lane Bailey.
I'd love to hear from you...
I was not selling or buying a home in the 80's, and can't relate to those kinds of interest rates. My question (altho I have to think they would NEVER get that high again) is what were house prices?
How could anyone today buy a $200,000 house at 13% interest and afford it? Let alone $500,000 or more?
Scare me!
Lane,
I stopped by to say THANKS for reblogging, and for the kind words.
Mike in Tucson