Rising intereste rates-Has it cooled off your market?

[jseamless]

The economy is growing, unemployment rates are shrinking, the stock market is doing ok. The purchase market should be strong for the considerable future.

Interest rates are still at 40 yr lows.

Those rates will start to climb but that is just a sign of economic recovery.

Moderate inflation is a good thing....

[LoanOfficer101]

The market may take a dive next year when over a trillion dollars worth of ARMs are set to be repriced. Many of these were written at rates that are 2 or 3 points lower than today's rates. Also, the use of "exotic" mortgages, such as option ARMs are going to start having a huge effect. NBC News has been running segments talking with homeowners who are watching their payments more than double. When that wave hits the market, there will be a lot of home owners "under water", meaning that their mortgage balance has grown bigger than their equity, due to the neg-am component of the option ARMs.

Rising property taxes are just as bad as rising interest rates, as they need to be figured into the debt-to-income ratio that lenders look at. Unless incomes keep pace, full-doc loans will get harder to get, as the total housing expenses plus debt will be too high for most incomes to support.

Note that last month the median price for a home dropped 2.5% compared to a year ago, with this being the largest drop in over 40 years. This should keep a lid on interest rate increases, lest the FED wants to put the economy into a recession.

- Joe Kamenar
Home Investors LLC