Do We Really Understand How Good It Is Right Now???

I’ve included a chart below that hopefully sheds some light on how incredibly low rates are right now.  I think that because rates have been so good for so many years now (we’ve been under 5% since late 2009), we have almost become numb to the fact that we are living in the best rate environment ever seen - at least in our lifetimes.  Sure, prices have gone back up.  And in our market, it feels almost painful – like a bubble about to burst.  But the reality is that the nation on a whole is just now getting back to where we were, based on the national house-price index, to where we peaked in 2005.  And rates then were a full 2% higher than they are now.  2% on a 30 year loan at $200,000 is about a $240 per month difference in payment.  So the reality is that in most areas, you can actually buy more for the same payment today than you could then.

About three years ago, I quit saying “you better act now while these rates are so low, they are bound to go back up soon”.  Now I just tell people “rates are great – if you are thinking about buying, it is a phenomenal time to do it”.  The truth is, we have no idea if/when rates are going to go back up – or continue to get even lower than they are now.  I’d probably still lean towards the thought that rates have to go back up sooner than later (55% of economists recently surveyed believe the Fed will begin further rate hikes by December – following the election).  But the reality is that with rates where they are now, purchasing power has outpaced market appreciation going back to 05.  And that is all because of the rate!

30 year fixed rates were 10.5% when I started my mortgage career.  So I probably appreciate where we are now more than the average Joe.  Just thought it would be a good time to remind you as well.