A typical question our County Properties real estate agents are asked is"when should we buy now or wait until the end of the year for better home prices and mortgage rates." Lets look at the current market conditions and some different scenarios.
The big question is where inflation is headed? Some economic gurus suggest that the recent surge in energy prices will inevitably spill over into higher inflation, much as the oil shocks of the Y's sent prices of everything soaring. Others argue that (for a variety of reasons, including the fact that the U.S. economy uses about half as much energy per unit of GDP as it did 30 years ago), inflation won’t be a problem. (Your guess is as good as the best-paid economic analyst.)
To make your mortgage rate prediction, you need to know the inflation rate for 2006 because interest rates and inflation tend to move in the same direction. The reason is pretty simple. If inflation rises, that means a dollar of savings at the start of 2006 has less buying power by the end of the year. So if those bond buyers (again, the folks who ultimately supply the money for your mortgage) see inflation rising, they’re going to want more interest to make up for the loss in buying power of their dollars. In the 1970's, the worst part of the inflationary cycle pushed mortgage rates above 18 percent.
The change of the fed rates usually effect 2nd trust deeds, mortgage rates, equitylines on homes, and credit card rates. Below is an historical chart of the prime rate.
Intended federal funds rate
Change and level, 2002 to present
Two Federal Reserve policy-makers warned on Wednesday May 27, 2008 that interest rate increases might be needed before too long to curb inflation, even as the United States struggles with a weak economy.
The remarks solidified expectations that the Federal Open Market Committee has ended an aggressive rate-cutting campaign and could start to reverse its policy course late this year.
As you can see with rise in oil prices the feds last look at changing rates was to not decrease and do a wait and see on increasing rates.
The following article explains the current market conditions San Diego and Riverside CA Housing Crisis Is Over
Here is another article regarding the first time in many years since the soft market started California sales increased 2.5% in April. Below is a chart of the two counties that County Properties cover, showing the new medium prices for each city.
|Apr-07||Y-To-Y % Change|
|Desert Hot Springs||$175,000.00||$288,000.00||-39.2%|
|San Diego County||$400,000.00||$495,000.00||-19.2%|
sources are California Assoc. of Realtors, and money magazine
This is the time to make your move, good deals are now getting multiple offers and our agents will help you get one into your next home. Call for counseling on for investing or a buying a home to live in now, while the market prices and interest rates are still low. Click Go to my website