An Interest Hike...Is it a YIKES!?

I received a similar email from one of my lenders.  Let's say for speculative purposes that is a sign of the bottom. This might then be signaling the later half of the buying window remaining.  That is, as buyers are trying to time the bottom of the market, the question at hand is, "Do you buy for the lowest price or the best rate?"  At some point, the lower prices are offset by the increasing rates.  If and when this is the case, the time to buy would be now or soon enough before the higher rates begin to offset the low and possibly increasing home prices.  I know only time will tell but there's something to be said for jumping in before it's too late.

This is a very interesting twist that we'll probably soon be facing due to:

• The massive amount of federal debt recently at auction combined with the soft interest of investors in purchasing that debt.

I follow some international business publications and the stories about the U.S. Dollar and the massive Govt. debt are not very promising for future interest rates. It appears some certain countries are slowly getting out of the U.S. Dollar...

And when the buyers of our debt continue to dwindle and the printing presses are running on overtime to print up money, we get to deal with the dollar going down in value even more.

It's going to be quite interesting what happens to home values if interest rates go up since that will take out buyers in an overbuilt market that certainly needs buyers right now and less sellers... the winners are going to be the ones getting in now with the low fixed rates in markets where it's cheaper to buy then rent.

If interest rates skyrocket and inflation hits... it's going to get quite interesting to see what happens.

Paul - well said, this is what makes the next "several weeks" such an interesting time for everyone.  

@Our falling dollar - maybe you can confirm this Paul.  Many Chinese like US cars? -- Maybe we can trade them steel for an "allowance"

And you and Brian are playing with the unsettling thought of another massive increase and simply the fear of another increase.   For a large contingent of buyers in our market, I'll go out on a limb and predict that if the rates steady out, this hike will stimulate many buyers who were in a hovering mode as they had every right to be in.

Thanks, Brian and Paul for the thoughts...it'll be an interesting ride indeed...

Have good ones,

- K

Do the Chinese like U.S. Cars? Not entirely sure... they've saved enough for a generation to where they have money to spend... and it's coming to the point that they don't need us to buy their stuff anymore.

Unfortunately... they are quickly getting into a position where they can demand much more then just an allowance for steel. Maybe Government Motors will eventually end up being Chinese Motors? Or... California will end up being owned by the Chinese? I'm sure the Chinese see the potential of all that oil sitting off of California's coast. Maybe California is worth the $2,000,000,000 we owe them? I'm pretty sure they could cut that state budget down within a month.

I'm also pretty sure they have no empathy for failure...

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5379285/China-warns-Federal-Reserve-over-printing-money.html

They are probably catching on that printing up money to buy our own debt is going to devalue their investments in the U.S. Dollar and they are not too happy about it.

As for the bump in interest rates stimulating buyers to get off of the fence? Probably but I'll stay away from that sales tactic and concentrate more on watching the value of the dollar... and watching silver, gold and oil continue to climb in price.

I'll stick to the Cheaper to buy then rent and positive before tax cash flows with the cheap rates which makes much more sense to me as for a reason to buy with all of the other uncertainties taking place. Things such as the number of U.S. Homeowners currently behind in their payments or in the foreclosure process...

http://www.reuters.com/article/bondsNews/idUSN2832609020090528

"The pace of defaulting mortgages jumped despite various moratoriums and government steps to cut home loan rates."

Oh... credit card defaults just hit a record high also...

Anyways... gotta get back to my Mandarin lessons.