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ASK the Loan Man Hans Bruhner - November 2014 - Did Interest Rate ship already sail?


ASK the Loan Man Hans Bruhner - November 2014 - Did Interest Rate ship already sail?

by Hans Bruhner

The Feds have been buying mortgage backed securities since September 2012 to keep a lid on interest rates and that is finally coming to an end in late October 2014. It has been a major boon to interest rates and the housing market and has helped people refinance into some really low rates and been a major benefit to the economy.

Many people have been screaming that the sky would fall once the feds stopped and interest rates have recently dropped. I do believe that rates could rise a little but not a lot. I do not have a crystal ball and if I did I would likely be sitting on a white sand beach with an umbrella drink in hand instead of writing this article.

The feds have been easing off on how much they have been pumping into bonds and the market has gone up and down on the speculation of what that means every time a change is announced. My gut feeling is that interest rates have pretty much stabilized to the market and we will go back to normal. Normal means that as the economy improves, rates get higher. I don’t get much argument when I say I expect rates to rise but nobody really knows when and what it will look like.

The other issue is house prices. I spoke with an intelligent young man who told me that he was willing to wait until prices go down and he felt we were in a bubble and prices were not realistic so he is waiting. I speak with others that feel they missed the low lows and they want to get in as quickly as possible because they don’t want to get priced out of the market.

I say, forget all of that speculation and second guessing. When you buy stocks or make investments, your financial planner will tell you that dollar cost averaging is the way to go (buy some every month and some will be higher and some lower and it will average out). With real estate it is different because you lock in the price AND the interest rate today and then you wait and see how you did. I can almost guarantee that you won’t do better than today’s rates for a long long time. I feel the same about housing prices because it is cyclical and we can see the cycles clearly in history. We do not know how long it will go up before it goes down, we do not know how long it will go up and for how long it will be down but we know it will happen. 

I said to the young man at the party and I say to you that I expect housing prices to steadily go up as they have for the past 100 years. Of course there are ups and downs, it is like a yo-yo on a steady escalator. If you wait for housing prices to come down and interest rates rise, you could get a better deal and still pay more for that house. Buy a house when you need one. Events like marriage, divorce, births and deaths, job growth and retirement and do not speculate on the absolute perfect time because the one thing I can absolutely guarantee is that nobody can tell you the exact right time to buy a house or stock but if you do it for the right reasons you might just get lucky along the way.

Need to know more? Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.

Hans Bruhner (NMLS 243484) is a home loan advisor for First Priority Financial, Inc (NMLS 3257). Both are licensed by the Department of Business Oversight under the CRMLA.  If you have a question, please contact Hans at (707) 887-1275 or