Your asking me what is happening today in Real Estate and loans? I don't know. Just kidding. I really do know, actually. Ya that's what everybody says. Everyone has an opinion. That's good unless it is based on someone's agenda and not facts. So, here's the facts.
Last week the Fed raised their discount rate by 25 basis points (.25%) from .25% to .50%, not the overnight lending rate amongst it's member Banks.
Why is that important? Well first of all, this mostly effects Banks, not the general public with equity lines of credit or Business lines of credit, etc. The Prime Lending Rate (Prime) is not effected.
The upshot of the Fed's move was a message to it's members that we are coming out of this financial problem and we are encouraging you (with the existing cheaper rate. now) to borrow from your fellow member banks (because it is cheaper) instead of borrowing from us (the Federal Reserve).
It also sends a message that rates are going to go up in the future across the board. In tandem with the Fed's move, Mortgage Interest Rates went up, mainly on the anticipation that we are at the end of this long cycle of historically low interest rates.
How is this going to effect the Real Estate market? Yipes, are you kidding me. Why in the heck did the Fed raise interest rates when it appears we are just starting to come out of this mess...
Well, look at it this way. They are loosening the nut on one of the training wheels for the economy. That's a good analogy. So we know they haven't taken the training wheels off yet but they are starting to and someday they will be gone.
Back to the question. We'll, at least in the South San Francisco Bay we have been in a Seller's market for about 6 months. Very low inventory and lots of multiple offers. Don't believe me?
Look on MLS Listings.com and pull up the # of Active Listings compared to Pending Sales and you will see that there are more Pendings than Actives. Pull up the current # of Active Listings including Condos/PUDs and you will see that the county wide inventory is below 3,000 total (2915 as of Feb 19, 2010). It was 5700 total Active listings a year ago. So inventory is about half of what it was a year ago. When I sold foreclosures (REOs) in the early 90s, inventory of Active listings averaged about 15,000 for several years in Santa Clara County. You can see where we are at today, comparatively.
Raising rates or threatening to, is only going to increase the urgency to buy, while prices are still fairly off and rates are very low.
So it's time to sell, if you need to. Time to sell and move up if you want to move up. You may not get as much on the sale of your property as you would have a few years ago but you will also not pay as much as a few years ago. However, you will definitely have a much lower interest rate than a few years ago.
So the moral of the story is: It's generally a good time to sell, it will get better for some months. It is most assuredly a great time to buy because it will only get more expensive and interest rates higher.
Signing off for now. PS: If you haven't refinanced yet and you can. Rates are still low, whatcha waiting for? Another Fed move? Fence sitters, please get off the fence, for your own sake.
All the best,
Geoffrey Gault, Broker
The William Jefferies Co.
Automated Mortgage Investment
1630 Oakland Rd. A109
San Jose CA. 95132
cell 408 202-2089
Office 408 573-0811