The madness seems to be over: 3.4% on a 30-year mortgage. It was the deal of the century. It’s now behind us.
The Federal Reserve has to buy a half a trillion dollars on Fannie/Freddie bonds each year to keep rates low. But they are rising anyway.
If the FED does stop this insane buying, mortgage rates could move higher . . . until the FED’s withdrawal from QE3 causes the next recession.
The FED cannot exit without bringing the pathetic economic recovery to an end. The stock markets know this. So do the commodity markets.
The housing market continues to recover. But you have to have good credit to get a mortgage these days. The bubble in housing that we went through in 2006 is not likely to return. There are too many underwater households. They cannot sell their homes and “buy up.” So, the supply of homes is limited. That’s why prices are rising.
Rising rates are therefore not a major threat to this market. It will cost people more to pay off their homes, but the rates we have seen were abnormal. For people with good jobs and good credit, it’s the time to buy . . . if they find a seller in distress.
Sellers who really need to sell are not in a position to bargain. They need the money. They need to get out. For buyers of rental properties, rising rates are not a major threat. The key is not the interest rate. They key is the sellers’ motivation to sell.