As posted in the Miami Herald article called “Mortgage Rates Rise”:
”It’s going go start to put a damper on the activity but not a whole lot,” said Grant Stern, president of Morningside Mortgage in Bay Harbor Islands. “Fortunately, prices have been steadily dropping off for a long time at this point and a lot of people are still well within the range of buying property with a loan they can afford.” ”
“It’s definitely going to dampen refinancing activity, though,” Stern said.
As you can plainly tell, higher rates are Not good for continued economic recovery, but the market forces that have created them are good for the overall health of the market.The higher long term interest rates on bechmark Treasuries are still very low by historic standards. This interim rise in the rates should encourage fence sitters to jump into the market as buyers and that’s the real key.
Obviously, it will be a big help to the market to allow those whose interest rates are in the 6-7 ranges to refinance at better terms.Certainly, not everyone who can take advantage of better rates, has been able to refinance already, but many of them have done so.However, the real estate market’s problem is primarily oversupply.Lower prices are going to trump lower interest rates in this market, since the capital cost is usually more important for the type of investors and first time buyers which the market is counting on to soak up these extra homes.
My realtors are telling me stories about bidding wars on bank REOs (real estate owned, the bankers term for repo’d houses).Short sales are still dragging on endlessly while banks take their time to make sales decisions, but once a property is bank owned, they are agressively cutting prices to sell.The percieved value of these properties is now higher than the market prices – and rightly so since many are selling for below the cost of building, even for new construction.
Now, if we were to see another run up of interest rates equivalent to the last 2 week’s run up, in the coming month, it would put the lid on the activity we’re seeing.I am betting that we will see some small form of market intervention by the Federal Reserve to use their already stated policy of buying both Mortgage Securities and T-Bills to prop up the prices (and lower the yield) of the 10 year T-Bill and provide for just 1 more 2-3 month period of artificially lower rates in the next 6 months at a time when it is psychologically appropriate.
