No Crystal Ball but...

Dated: April 5 2021

Views: 1262

No, I do not have a crystal ball, but I have learned a few things after 36 years in the real estate industry. One of the most obvious is that when interest rates go up on mortgages, the value of homes slows down or possibly even worse, it can decrease as it did from 2006 to 2012.
What I see happening, if ever so slightly, is an increase in inflation in our economy. You cannot turn on the news without hear about it. And we all experience it in our daily lives. Look at the price of gasoline, food and yes, homes. We have an independent government agency known as the Federal Reserve Board which is charged with 2 economic priorities:

 1) to keep unemployment as low as possible;

 2) to keep inflation in check. 

They see them as polar opposites, in that high unemployment usually does not exist at the same time as high inflation. They have a number of tools to affect these economic elements but most of them are used to affect the interest rates in the market, even mortgage rates. When unemployment is increasing, they cause the interest rates to go down, believing that low interest rates will cause consumers and businesses to spend more. This theoretically causes businesses to hire new employees to keep up with the new demand.

When inflation is increasing to some unacceptable level, they cause interest rates to rise, thereby stifling demand. Right now we are hearing and seeing a lot about inflation, but the results of the pandemic have also caused a big increase in unemployment so the Fed has been what they call "accommodating". They have stated that they see this low interest environment to continue for the rest of the year. But if inflation continues to increase, all bets will be off.

Interest rates are at historic lows, but last week interest rates on mortgages jumped from under 3% to just over. Is this the beginning of a trend? No one without a crystal ball can say for sure, but I do believe it could be the beginning of an upward trend. I do believe that it is time to move on buying a house or selling your current one if that is in your plan for the future.

I have posted an article on my website, mnhomesbydave.com, under the NEWS tab if you would like to learn more or give me a call and I would be happy to discuss it with you. Thanks for your time
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Dave and Ann Feerhusen

"Experience you can trust!" I am very fortunate, along with my partner and wife, Ann, to have spent my career of 37+ years helping people successfully market their homes in the Twin Cities. We have ha....

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