June 10th, 2009 marked the highest yield for the 10 Year Treasury bond is the past eight months. That yield was 3.9%. What that means for the would-be homeowner is rising interest rates for a 30 year mortgage. The average 30 year mortgage rate for the week ending June 18th was 5.625%. That's wonderful from a historic perspective, but not so great for buyers who could have had an interest rate as low as 4.5% only two weeks earlier.
Buyers are confused as go whether rates will come down again, and have decided to adopt a wait-and-see attitude. That's not surprising, considering that the bond market is equally confused. Mortgage applications are at a seven month low.
It won't be long, in my humble opinion, before mortgage rates at 6% will be considered attractive, and we'll be pining for the days of 5.625%.
The reason: Consumer Price Inflation. Central bankers around the world are grappling with trying to reverse the stimulus they created just months ago.
Reverse it? Isn't the Federal Reserve going to give us more stimulus? The answer is that they cannot. Don't look for a $15,000 gift from the government (your neighbors, actually) for first time homebuyers. There was talk of monetizing the $8,000 first time stimulus for homebuyers so it could be used as the downpayment. It hasn't happened. It may not happen.
Here's the question facing REALTORS and their buyers: Is inaction--doing nothing--the prudent course right now? Or would you rather buy a home and secure your future?
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