Wednesday, February 20, 2008

South Bay-Beach Cities: Get Ready..Rates Are Going Higher

When it rains... it pours is an old saying that seems perfect for the current South Bay-Beach Cities' real estate market. It's not enough that volume of sales is down.. today we got hit by a massive increase in mortgage rates. Dan Green wrote in his The Mortgage Reports post about the rise in rates saw the largest one day rate increase in 30 years. Rates today are one full point higher then yesterday.

In my post about What's Up with Interest Rates I speculated that inflation was going to be far more of a worry then "recession". Looks as if the market agrees as oil is once again hovering around $100 a barrel and the consumer price index rose 0.3% compared to the expected 0.2%. It definitely wasn't unemployment that triggered the massive rise in rates.

Once more I'm going to point out that this market is far more like the one in the late 70's and early 80's. The last time I saw rates rise like this they went up 6% in 6 weeks. Believe me this is not a good thing...this is scary stuff folks. The FED is worried and much as I hate to say it I don't think they really have a clue about what to do. They keep trying to micro-manage the economy and as Greenspan discoverred..that never seems to work. I'm willing to bet they will pander to Wall Street and lower short term rates once again which will more then likely push up long term rates.

The financial community is scared. Long term rates are not going down even if the FED cuts rates again at their next meeting. If you are buying, the best advice I can offer is to lock in your rate for 60 days even if it costs a bit more. Rates may adjust slightly over the next few days but you can count on them going upward not downward as long as the markets are trying to determine just how much risk they are willing to accept and at what price.

1 comment:

wzweifler said...

South Beach contrarians - WE will buy distressed mortgage debt and want to talk to others who share our enthusiasm for this contrarian strategy. Waiting for effective bail out could be like waiting for Gadoe -