Most people believe that they treat others fairly and would never discriminate against others based on their race, religion, or ethnicity. Agents and property owners who offer to sell or lease a,
Yin & yang, inflation & interest rates
Dated: April 10 2022
Mortgage interest rates are driven by inflation. If you had a million dollars and wanted to lend it to a home buyer, you’d choose an interest rate that would make the money work for you—you’d expect to make a profit. But if you believed that the dollars received in mortgage payments 10 or 20 years from now would be worth considerably less than the dollars in the original loan, how would you keep from losing money? You would charge a higher interest rate.
Inflation can be harmful to our economy as a whole, so the Federal Reserve has been charged with keeping it from doing too much harm to our standard of living. The Fed is now planning to fight inflation by increasing the rate it charges large banks, and probably by cutting back dramatically on “quantitative easing,” or the way it has been supporting the real estate market by buying and holding mortgages. This will keep inflation from running away with the economy—but probably at the price of causing a recession.
You might expect that if we enter a recession, that will cause home prices to drop—we’ll finally see the housing bubble burst. However, in 8 of the 9 recessions since 1960, home prices continued to rise. The exception to this rule was the recession of 2009, when the collapse of the housing market was the cause of the recession. So, we shouldn’t expect home prices to drop—but we can expect interest rates to go down, as they have consistently done in previous recessions. There is good reason to believe that home prices will continue their upward trend (although probably not at the double-digit pace of the last year or so), and that in the next 2 or 3 years, interest rates will be more affordable than they are now. In a couple of years, today’s buyers will be happy with the prices they paid, and likely will be able to refinance down the road to reduce their monthly mortgage payments.
As a residential real estate executive with an extensive background in corporate marketing, I am able to apply unusually strong skills in marketing communications, e-marketing, strategic planning and ....