“Remember that any forecast of future interest rates, including the market’s forecast as reflected in the shape of the yield curve, is often wrong, but an idea of where interest rates are headed is better than making a blind decision.” How Interest Rates Affect The Housing Market.
Housing recovery will be tied to jobs. There are 2 types of people that buy homes in Raleigh: Buyer’s seeking a place to live and investors seeking an opportunity for cash flow. Knowing that jobs are critical to the real estate market, I was confused just like everyone else with last weeks reports for job growth and unemployment.
David Stockman, Former Director of the Office of Management and Budget under Ronald Reagan told CNBC “Thirty days ago we were told 130.7 million jobs in the economy, in December, this morning it was 130.2,” he said, adding, “that’s the half million.”
There is a correlation between mortgage rates and the bond market. The Federal Reserve administers short-term interest rates to help control inflation. The bond markets perception of hoe the Fed is doing determines longer term interest rates, such as the yield of the U.S. Treasury 10-year bond.
“The fiscal situation is certain, in my view, because the political parties are totally paralyzed, to lead to a bond market conflagration—that’s when the yield really soars, that’s when the sell off really begins to happen, and that’s when Congress and the White House finally wake up,” Stockman said.
There was a bond sell-off last week and mortgage rates have risen. After talking to a mortgage lender this morning, we expect to see something around 5% when rates are announced to today. A couple of weeks ago this same lender was quoting 4.5%.
What does this have to do with the Raleigh real estate market?
The inventory of homes for sale in the Raleigh area is on the rise in anticipation of a busy spring. Large inventory, fewer qualified buyers and rising interest rates create urgency. If you are interested in buying a home, now is a wonderful opportunity to be in the market. If you have a home to sell, you need a plan to compete.
Other information for this post came from US Economy ‘Heading for a Wall’: Stockman. Published: Friday, 4 Feb 2011 at 2:21 PM ET