Thursday January 16, 2014
You’ve likely seen the signs in your neighborhood of the market returning to stability. There are less for-sale houses, your neighbors are refinancing due to historically low interest rates, and some are even finally able to check items off renovation lists. While this apparent boom in activity seems fantastic, in reality, it’s not all positive.
In June of 2013, the federal government announced intentions to eventually pull back on monetary easing, which caused an artificial spike in interest rates. While they are still “historically low” compared to 15 or even 10 years ago, over the past six months, interest rates have risen drastically—at times upwards of 1 percent. While this change will cause our economy to move in the right direction, it will only cause interest rates to increase.
This change is upon us. Starting in January of 2014, the federal government began pulling back investments in securities, and will continue to do sto the tune of $10 billion per month.
With the decrease in government funded securities and increase in interest rates, states with large residential markets began to realize immediate effects. Suppliers have now taken the opportunity to raise costs to recoup from the past five-plus years they’ve spent barely keeping their heads above the water.
These costs have started to trickle into neighboring states and will soon be the norm nationwide. What does this mean for homebuilders? It means an increased cost of doing business, and in turn, increased home values.
Over the next six to nine months, you have the opportunity of a lifetime to do what you’ve always dreamed of: building your own home. While interest rates are on the rise (up about 1 percent from 3.35 – 4.5 percent), they are still low in the mid-four percentile. It’s the perfect time.