Planning to buy a home in the Raleigh area? What will happen to mortgage rates?

The Federal reserve (Fed) has confirmed their position that it plan to stop purchasing mortgage backed securities after March, 2010. The Fed has been buying these securities since January, 2009 to keep the housing market from sinking to lower levels. The Fed’s actions have helped keep interest rates at historic lows during a very critical time for the housing industry. What will happen when the Fed quits buying mortgage backed securities? Everyone I turn to expects rates to rise and the question is not if they will rise, but how high?

A consensus I have drawn from reading various articles is around 1%. We will likely see prices climb as soon as the Fed makes it’s announcement and the buzz is that we will see rates hover around 5.75% and 6.0% into fall, 2010. Greater increases are expected after that but I have no clue or viable opinion what that means yet.

Opinion aside, here are the facts: Interest rates today are still very low. Housing prices have come down in the Raleigh area about 10-15% from market highs. Inventories of homes for sale still favor home buyers in most areas of town. The government is providing tax credit incentives for first time home buyers as well as qualified move up buyers who are able to contract a home by April 30th and close within 60 days after that.

If you are considering a move this year, then you might consider moving now vs. later. Do not overextend yourself just to take advantage of the credit but do include these thoughts into your plan for the year.