Call Us Today: 303-697-1767

Interest Rate Forecast

By in Uncategorized with 0 Comments

Mortgage interest rates have gone up by .5% since the election. The number one question is, “Are interest rates going to keep going up?”

There are a number of indicators telling us that rates are probably not going to go down. President Trump is proposing a number of inflationary government policies, and even though he may not be able to enact all of his proposals, inflation is all but guaranteed in the coming months and years.

So what does this mean for homebuyers?
It probably doesn’t mean much at the moment. Even though rates are higher than they were a month ago, they are still incredibly cheap, compared to where they have been historically.
If inflation continues over the next few years, people who own real estate will be in much better shape than those who do not. Home values typically go up at least as much as the rate of inflation, and if you have a mortgage that’s locked in at a lower rate, the real cost of that mortgage payment goes down as inflation goes up. In addition, if you have a mortgage during inflationary times, you benefit by having leveraged your investment. As an example, if you put 5% down on a $400,000 house, the down payment is $20,000. If inflation causes your house to go up by 5%, the value of your property has increased by $20,000. Your equity is now $40,000 (your original $20,000 down payment + the $20,000 increase in value). So you have doubled your money.
Does this mean you are guaranteed to make money if you buy real estate? Of course not. I could be completely wrong about this. Congress does not tell me what he’s planning, and neither do China, Japan, or any of the institutional investors who purchase mortgage bonds. However, I’ve been around a long time and have seen this scenario play out multiple times before. Economic cycles tend to repeat themselves. In my estimation, the smart money is on a rise in both inflation and home values.

Call me to find your dream home now.

Share This

Leave a Reply

Your email address will not be published. Required fields are marked *