Orlando Real Estate

Interest Rates Are Falling

December 18th, 2008 7:53 AM by David W. Welch

Earlier this week the Fed announced an historic drop in the rate they charge member banks. They are also taking action to put pressure on mortgage rates that we are seeing take effect. I received e-mails from several of the lenders I know yesterday, and one even said they are thinking they could get lower before the end of this week. This makes homes even more affordable for anyone making a purchase right now. If you are considering buying, please think about this carefully. Rates are heading below 5% possibly, and these are 30 year fixed rates. It is hard to say how long the rates will stay this low in conjunction with lower home prices.

I say this because the lower rate will stimulate both demand for mortgage funds and demand for real estate. When the cost of mortgage money goes down re-financing activity goes up. This actually absorbs a portion of the mortgage money available to be loaned out, and puts upwards price pressure on the remaining mortgage funds. In other words, we should see a rush on re-financing activity, causing mortgage rates to go back up some. Second the demand for real estate purchase mortgages puts upward pressure on real estate values and mortgage rates. For everyone who has been waiting, consider this: The Fed cannot go below 0%. The current target Fed rate is 0% - 0.25%, which is pretty much Zero%.

Here is my forecast for Orlando Real Estate buyers: You have through February to take full advantage of the low prices and low rates. By March rates will start going back up, and so will prices (although prices will move much more slowly.) I think you absolute best time to strike is between now and the end of January. Most people don't jump into a down market until six months after it has past the bottom. I have already called October 2008 the bottom of real estate prices in Orlando. November did sink lower and December's numbers are sure to be lower too, but economic fundamentals support Octobers median price of $180,000. We are currently in an over correction that is likely to last through the end of January.

David Welch, Remax 200 Realty, Orlando Real Estate

Posted in:General
Posted by David W. Welch on December 18th, 2008 7:53 AM

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