Government backing of banks and the need for those banks to raise capital has resulted in higher interest rates than previous months have held. The reason: banks are offering higher rates for depositors funds, in order to attract deposits, which raises capital levels for the banks. Investors, also, have been seeing an increase in confidence in markets, which pumps money in, and drives rates up as the investors look for profits. In point of fact, the FDIC, the bank regulator, has now insisted that an arm of GMAC, called Ally Bank, an online banking service, lower its depositor interest rates so as to avoid too much stress on other competing banks. High rates attract depositors, but also result in higher rates on loans, to make up the difference.
Why is this all important for real estate buyers? Because mortgage rates have started to climb, and have now passed the level they were at December of 2008. Not so high as to be crippling, but higher, and the trend is up. This fact reduces the benefit and incentive of the various tax credits being offered by the Federal Government, and makes housing less affordable, in a time when we are trying to stabilize the market. If this trend continues, housing will become less and less affordable, and this will halt the rehabilitation of the housing market, which in turn affects many other markets, such as construction materials and jobs, mortgages, other lending and credit, and much more.
It is my opinion that the FDIC is right to be concerned, and we should enhance our regulation of the money markets, and most definitely NOT let business continue as usual at the banking institutions. We need to stabilize the housing market, the money markets, jobs markets, and much more… the recession is not over folks, and we need to remember that fact.
I surprises me as to how many sales people think that by talking up a positive outlook things actually become positive. To me, it is more like having your head buried in the sand, refusing to realize the facts of reality. Don’t these sales people realize that the customer or client is also reading the news, seeing market trends, and realizes that the nonsense being spewed by the sales person is just that: nonsense. Yes, now is the time to buy a home, but the reasons are real, not fabricated by sales people to sway customers. You know the phrase, if you cant dazzle them with brilliance, baffle them with Bull Shit. I hope we are all too smart to be baffled.
Here is the fact: housing prices are at decades’ lows. For now, interest rates remain relatively low, but for how long? Bargains are there for the taking, lenders are lending, houses are selling. But I really think we should base our decisions and analyses on real world facts, not on delusions or propaganda, as this will make for more sound decisions, of course.
In Rhode Island, the market is moving, and prices stabilizing. They will not likely be falling any more, or at least, not as previously. Interest rates on the other hand are starting to rise. What better time than the present?
