(English) The Fed Exit Raises Interest… Literally
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I think your analysis is «dead on». My fear is that people, «hoping» that dramatic rate increases won’t happen, will miss out on quite possibly the lowest interest rate environment that we may see for the balance of our lifetimes.
If every one of us is committed to spreading the information, as I know you are, we can help families make the right decisions.
I’ve been saying this for quite while now. I fear that many will have a rude awakening after the fundamentals of the mortgage market begin to ‘do it’s thing’ as a result of the Fed ceasing to subsidize this market. Not to mention the Home Buyer Tax Credit will be expiring shortly thereafter.
Remember, small changes in interest rate can equal large changes in one’s payment. Now is not a bad time to buy. (Could be why I’m seeing a surge in activity in the ‘upper end’ of my market).
-RealtyMan
It is up to us to make sure we get the word out so people can make a good, informed decision.
I think your argument is strong, however, I can’t see the Federal Government letting interest rates go to 7-7.5% overnight, it would severely impact the recovery.
I can definitely see the Fed letting interest rates increase dramatically, and dramatically to me means 1%-2%. The number one concern for the Fed right now is our unemployment. According to the Director, Dr. Doug Elmendorf, of the Congressional Budget office in Washington D.C., we will not see the natural rate of unemployment again (which happens to be 5% regularly) until 2014. This is a major problem, because currently in the United States, there is a fundamental disconnect between our tax revenues and debt. When people don’t work, they can’t buy homes and the government receives a much smaller amount of tax revenues, and without the taxes, the Fed has no ability to continue to support the housing market. A positive aspect is private lenders entering the market again, but they are still extremely cautious in lending, as they should be.
Great points Cary!