The Fed, Stock Market & You

It was an interesting week on Wall Street. It is amazing how much interest that is placed in not just what the Federal Reserve says, but also what it doesn't say! Evidently, because the Fed didn't saying much about inflation and the interest rate, the investors on Wall Street saw that as a statement that the interest rates wouldn't be going up in the immediate future. What does that have to do with you? Good question.

As far as the housing market is concerned, in the views of professional investors on Wall Street, it means interest rates for home loans will continue to be at historic lows. That is great news! With the solid housing market we enjoy in the Greater Cincinnati Area, that means you can buy a home with good expectations that not only will the values continue to increase, but you can buy a home with mortgage payments that are very affordable. Let me give you an example.

A loan for $150,000 on a 30 year, fixed rate loan at 6.5% shows payments being $948.10. If the interest rate increase to only 8.5%, the payment jumps to $1,153.37! When the interest rate climbs to 10.5%, that same loan, or house will cost you $1,372.11 a month! That is $424.01 a month more for the same home that could be bought today.

One more little observation. In 1997 a local title company handed out pamphlets that contained mortgage payment tables. If you knew how much you were borrowing and what the interest rate would be, just look at the tables and you can see what your payment will be. What is rather amazing about this 10 year old pamphlet is that the LOWEST INTEREST RATE it shows is 8% and it goes up to 13.75%!!! Only 10 years ago, the interests rates we are enjoying today were totally unexpected.

When the market is good for buyers, it will also be good for sellers. My suggestion, don't wait for interest rates to return to what was considered normal only a few years ago!

Jim
RE/MAX Elite 513-826-1924