What makes mortgage interest rates go up or down?
The simple answer is that mortgage rates are tied to the US economy. I don't want to get too technical and explain mortgage backed securities and their relation to the 10 year US Treasury Bonds, which is the pool of funds that banks draw from.
I want to keep it simple by saying mortgage rates are tied to the current value of a US Dollar. Inflation makes dollars worth less (higher rates) and recession makes dollars worth more (lower rates). We're coming out of an extended recession and coming into an inflationary period.
The rule of thumb in a rising rates period is "the sooner, the better".
The simple answer to how the economy relates to home prices is, yes- they are related.
Home prices are affected by supply and demand. Because people have a need to live a reasonable distance from where there are jobs, the supply tends to be somewhat limitted.
Therefore, as employment stabalizes (less unemployment) the demand for homeownerships goes up. This demand drives prices up.
In real estate, the first three rules have traditionally been; 'loaction, location, location'. Now we have to factor in terms like 'market collapse', 'double dip' and 'tightened lender restrictions'. It sounds confusing.
I want you to rest at ease. What is a bad situation for our economy and homeowners is great for buyers and those who have equity. The prices have dropped to historic lows, while interest rates are also at historic lows. It's a good time to buy or refinance to a lower rate.
The lender guidelines are almost identical to rules we worked under when I started in the lending industry. While they are not the relaxed guidelines that helped cause our crisis, they are not unreasonably hard. The lending guidelines are designed to help insure your success as a homeowner. Now might be an historically great time to invest in your dream home.
There are some major economic and social factors that effect buying a home in today's market.
First, there is an over-supply of homes for sale. The over supply has caused the prices of houses to fall. That happens whenever there is more supply than demand. The housing markets are very locational and varied by price range, but housing values in California are beggining to stablize and in some areas, increase.
Secondly, the availibilty of mortgages is somewhat limited. Mortgage lenders have had a tough time in the past few years. Most lenders have gone bankrupt. The ones that are still in business are very careful that they don't take on any more risk so they can stay in business. This limits the financing options to only a handfull of choices.
Now, perhaps more than ever, you need the honest, experienced guidance that we offer at All Access California. We can guide you through the financing and help you to take advantage of historically low home prices.
Please call today to speak with a friendly, knowledgable representative at 599-322-5005.