Interest Rates Make the News

The 30-year fixed rate mortgage has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971. I have not seen numbers like this before so I just had to post them.We will return to our regular non- nonsensical program as soon as possible.

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7 Replies to “Interest Rates Make the News”

  1. The drop in the mortgage rates is going to help first time home buyers big time, they should make the most out of it, I would advise my friends and family to buy a home now!

  2. teresa boardman says:

    Bob – I would never advise someone to buy a home now with out first getting a little information about them. There is no universal “right time to buy” for all potential buyers.

  3. Patient Buyer says:

    Great response, Teresa.

    Thankfully, this crisis will probably create an environment where the measured advice such as you give will be heeded once again.

    The continued uptick in job losses will become, in my view, the most controlling factor in determining a market bottom.

    It is very clear that most replacement jobs will not replace the income for those losing jobs. In a deflationary labor market, rents will fall first, followed eventually by real estate.

    Anyone buying a house right now needs to eliminate any concept of ‘appreciation’ from their five to seven year plan.

    Cars don’t appreciate, I still buy cars. Clothes don’t either. Or furniture.

    I want to own a house because I want one. Why is that not enough for so many people, to the extent that they need to promulgate these myths about how appreciation really works?

  4. teresa boardman says:

    PB – I still have buyers who are buying houses. They just want a place to live. Have to say the economy and the real estate market are a bit frightening these days and I don’t always know how to advise people but I do know that if they don’t have a steady income and money in the bank and a good credit rating buying might not be the best move.

  5. Patient Buyer,

    I see your comments on here often and you’ve got a very healthy perspective on housing. There is an investment perspective to owning a house that I think will always be used as a sales technique because over the long term, housing does appreciate. In times like this though I agree that that future appreciation potential cannot be used in calculating today’s decision… the house needs to stand on its own merits.

    Given that, I certainly hope we see the market start a slow march of appreciation within the next 2-4 years versus your 5+ year timeline. Hope though will not pay the bills however so I agree with T’s way to counsel buyers.

  6. Patient Buyer says:

    I agree, and my analysis of house ownership as an investment (for my personal needs) is based on the following:

    *The cost of renting a residence
    *The cost of renting money to buy a residence
    (tax-deduction adjusted interest)
    *Insurance (for both owners and renters)
    *The tax-adjusted risk-free rate of return
    on treasuries or certificates of deposit
    (opportunity cost for downpayment and
    principal payments)
    *Transaction costs (closing costs and commissions)

    The “sell price minus purchase price” difference must be adjusted for all the factors above before a meaningful number can be affixed to appreciation.

    When I hear Joe Homeowner talk about the fact that they bought in 1975 for $40,000 and sold in 2003 for $220,000, therefore they “made” $180,000, I bang my head on the wall.

    I think we are nearing the point where houses are priced at a level that the financially prudent will consider.

  7. Patient buyer,

    I agree with you on pricing and interest rates bringing the costs of owning a home inline where it makes sense to make a purchase. In Texas we are at a point thanks to these interest rates where it is foolish to not buy if you plan to be in the area for 3-5 years. This is based on it costing more to rent a home than to buy it.

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