Homeowners Tax Credit and Mortgage Rates
As of today, there are only 44 days left to secure the homeowner’s tax credits. Not only will the credits expire shortly, experts predict that mortgage rates will rise, and possibly MORE than at a modest pace. James Hagerty cites timely information in this Wall Street Journal article.
Steve Harney, renowned real estate advisor, states this in his recent monthly newsletter…
1. Realize that the price a homeowner can get for their home today is greater than it will be on May 1st.
Any buyer who is not in contract on April 30th this year will miss out on the Home Buyer Tax Credit ($8,000 for a first-time buyer and $6,500 for the move-up buyer). That does NOT mean houses will not sell after April 30th. It means that the buyer will demand a better price.
If you need to sell, sell now.
2. Realize more and more experts are predicting a surge in interest rates later this year. Some examples:
Guy Cecala, publisher of Inside Mortgage Finance:
“There is no question rates have been kept artificially low by the Fed’s heavy buying. My opinion is that rates will go up a full percentage point initially.”
(meaning that 30-year fixed conforming loans, now hovering around 5 percent, would hit 6 percent)
Christopher Thornberg, principal at Beacon Economics:
“Clearly, when they (the Fed) stop printing all that money, it’s going to be a shock to the system. I have to assume that when they pull back on it, it will cause a 100- to 200-basis-points rise. When they start selling off the stuff they purchased, which by my guess would come early next year, that would cause another 100- to 150-basis-points rise.”
(meaning rates of 6 percent or 7 percent originally and then 7 percent to 8 percent or higher within a year)
For a profile of current rates, take a look at this Wisconsin Mortgage rate sheet , as reported this week. A one percent increase in interest rates will equate roughly to a 10% decrease in home price, in order to keep payments apples to apples. This equates to less buying power for purchasers, and reduced prices for home sellers. For questions regarding this information, contact me directly at ktrepton@shorewest.com.
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Karen Trepton
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