Will interest rates ever rise?

What do you think about the shadow inventory where many of the homes that's foreclosed, but has not hit the market? With a lot of inventory that's not released yet, do you think the price will remain low?

I'm starting to see that interest rates are going to stay low for awhile, and with abundant of inventory, I can see the housing prices remaining flat for several years so I think it'll be a good time to buy for the next several years.

I don't think I'm going to time to buy the house with interest rates rising as I can see now that interest rates won't go up unless the economy is growing and with economy growing, housing prices could start to pick up as well.

But if interest rates rise without the economy growing, I think that'll drive the home prices down b/c less people will be able to afford it, so I don't think you're correct that demand will go up b/c less people will qualify for higher loans.

Cities are bulldozing down foreclosed neighborhoods to save the values of homes in other parts of cities. Be careful where you buy. Entire housing developments are being razed.

Interest rates will rise if the world loses confidence in US debt or if we have a real inflation scare.

It's not about whether I am correct or you are. Your scenario is plausible and makes sense. More foreclosures hitting the market could drive prices down further. And I agree with you that interest rates aren't going anywhere in the near future. I just wanted to warn you of what I think will happen. I think that there are still a ton of investors ready to buy if prices drop further. I am one of them. When you can buy a house right now and immediately rent it for positive cash flow, you do it. I just don't want to see you try to time the market and look back and think, well, 2012 was actually the best time to buy. And again, unless you are paying cash, lower prices due to higher interest rates doesn't save you money at all. Are you planning on paying cash?

RunninginCircle wrote:

I want to be a first time home buyer, but I want to wait until interest rates go up since that should push down the demand more and lower the home prices. However, is interest rates ever going to rise? I mean, there's no way the Fed would want housing prices to drop or slow down the economy so is it ever going to rise up? Everyone keeps saying that interest rates will go up, but is it really going to go up?

How long has Japan's interest rates remained low since their housing bubble burst?

sold in may 2005

rented until aug 2011 when I bought another place

I really do not want to invest at this point in my life but it is a great time to buy as much as you can if you want to make a pile of money nothing like 50 percent of real value using opm at 5percent lol

I benifited from the late 90s RTC s %l scandal

This is bigger but similiar

If the area you want to buy in is not one of the depressed over built areas and just suffered from over pricing versus over building it is indeed time to buy you have a great price at a low interest rate so how do u know a great price do some research learn about replacement cost look into the price history of the house check out the houses market value in terms of rent

The bottom line is don't spend more than you can afford to lose because the bottom has not been reached and the economy is in terrible shape. You can't believe the media, politicians, economists, nor anyone on this thread including myself. Don't put down a huge amount of money since you may have to walk away from the mortgage. The U.S. has become an old world nation of haves and have nots. 1/2 of the United States is now poor.

RunninginCircle wrote:

If more foreclosed homes are hitting the market, wouldn't that drive the prices even lower? Just from looking at supply and demand.

If more investors buy those foreclosed homes, wouldn't there be more houses to rent?

I did hear on the news about letting investors buy number of houses at once and turning them into rentals. I first thought that'll be good as a renter as it will give me more choices and hopefully drive the rents down, but then I thought, if few companies are owning bunch of these homes, they'll get to set the price on these rents which could ultimately drive the rents up.

The prices may go a little lower, but they have already been so low, they won't go down that much. There will be a few more houses to rent, but those foreclosures are also being bought by investors that do the rehab to make them livable again so they can be sold in move-in condition.

The only houses that are selling as bundles are those that can't sell for enough for the bank to get any money back. The minimum commission to sell a house is around 3k regardless of the price. If that house only brings 5k, the bank would have to bring money to the closing. They bundle a bunch of those houses so they only have to pay one commission instead of many.

The rents are different for different areas. I have seen rents higher in larger cities where the demand has went up, but I have seen them lower in smaller cities more hurt by the economic downturn. It really depends on the area.

so, it looks like the chance of interest rates going up is with economy getting better. What about without the economy improving, inflation starts to creep up? Would there be a situation where overall inflation rises, but housing prices to continue to fall?

If interest rates rise and housing prices to drop, I see it as a win to wait b/c 1. I'll have much bigger down payment by waiting 2. property tax will be lower 3. with lower price, it'll be easier to pay off the mortgage early.

think of it this way... "supply and demand"

the demand for money = its interest rate

while government sells treasuries to fund itself, the money that is buying the treasuries is perhaps greater in size than the current supply. WHY? Simple answer has to do with capital spending and risk allocation of capital. companies are not spending cash on capital equipment or business investment, instead they are buying treasuries. investment capital is not allocated to riskier assets like stocks, instead it is being held in risk less assets like treasuries.

RunninginCircle wrote:

Everyone keeps saying that interest rates will go up, but is it really going to go up?

Who keeps saying this? Bernanke himself has said that rates are likely to remain low for some time.

do they really? wrote:

RunninginCircle wrote:

Everyone keeps saying that interest rates will go up, but is it really going to go up?

Who keeps saying this? Bernanke himself has said that rates are likely to remain low for some time.

What I meant was people say that since the interest rates are at historically low, only place to go from here is up. Not saying it'll be going up now, but sometime in the future. That future could be in 2014, 5 years, 10 year, etc. That's where I'd like to get people's opinion.

If you buy a house now:

1) you get the best interest rate ever

2) you begin paying down the mortgage now as opposed to later and build equity earlier

3) prices are flat or falling and you don't have much competition when making offers

4) you start getting the interest and property tax deduction for you income taxes

5) you get the value of living in the house you own and can do what you want to it

If you wait:

1) save for bigger down payment but how much? You still need to pay rent now, right?

2) prices could go down, may be worth it

3) if interest rates trend up, people will be more anxious to buy, more people bidding on houses, prices could up

If housing stays flat, it's best to buy now if you can and you are willing to stay in the home.

Property taxes adjust any way every 1-3 years within your mortgage.

I just don't see how prices could go up with higher interest rates. I can see it for less expensive homes as those will still be in the range for what many people could afford. But for medium priced to expensive homes, with higher interest rates, many people won't be able to afford the monthly payments so there should be even less demand for medium priced to expensive homes.

Yea, I'm paying rent right now, but I can still save for down payment. I mean, that's how it used to work before 3.5% down became popular. Also, when I buy, I plan on buying something nicer to be a forever home rather than a starter home. I'd rather keep renting and that's like my starter home while saving for a bigger down payment.

Would you go straight to a 20-30 year fixed? I'm considering a 10-1 ARM to get 3.875 for 10 years, but I'm wondering if 30 @ 4.125 is a better bet for the future.

Lender I'm talking with would keep the 10-1 as a portfolio loan and 30f would go to secondary market. Makes me wonder if he's urging me towards the ARM for his personal benefit.

Curious to get a few opinions on a 10-1 ARM right now.

Thanks!

pics of my wife for good advice :P

RunninginCircle wrote:

I just don't see how prices could go up with higher interest rates. I can see it for less expensive homes as those will still be in the range for what many people could afford. But for medium priced to expensive homes, with higher interest rates, many people won't be able to afford the monthly payments so there should be even less demand for medium priced to expensive homes.

Not to put words in the other poster's mouth, but I think he's saying that as rates rise, people will be anxious to buy before much higher rates set in. Rates will rise gradually. The Fed doesn't just go from low interest rates to high interest rates. They raise rates by a quarter or half percentage point at a time.

If they move rates from .25% to .5%, people will expect continued rate hikes in the future. People who are considering buying a home will have incentive to buy now instead of waiting for rates to go up further.

Okay. I see what you're saying.

But if that's the case, interest rates will only go up if economy improves since people will be anxious to buy with rates going up only if they could afford it.

Why would you wait for economic turmoil to happen before buying a house?

RunninginCircle wrote:

Also, when I buy, I plan on buying something nicer to be a forever home rather than a starter home. I'd rather keep renting and that's like my starter home while saving for a bigger down payment.

Now this makes sense.

You don't want to be stuck in a house that you don't like or have grown out of.

You're not really waiting for prices to drop, you are waiting for your income to go up.

Different discussion than timing the market.

You could buy something you could afford now, keep and rent it out later when you can buy a bigger house.

A litle risky but you can make out well if you hold it long enough and can keep it rented.

But renting until you are really ready to buy is the safe way to go.