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Mortgage rates are extra low and will not stay there forever

Mortgage rates hover in the 4.5 to 5.25% APR range nowadays for a 30 year fixed rate mortgage.

At the Daily Reckoning website, their recent article entitled “Why you should buy a house” is loaded with practical, circumspect thinking about “why a house and why now?”

The writer, Eric Fry states: “Undoubtedly, the housing market will continue to produce ample pain and suffering in the months ahead…along with ample anxiety in the years ahead. But it is possible, if not likely, that the pain and suffering will yield a highly satisfactory reward.”

So, back in October, when I obtained a 4.0% APR Veteran’s Administration loan on a 30 year fixed rate mortgage, I knew that rates were extra low.

From a healthy, historical perspective, they are still extra low, but by the end of this year, rates are forecast to be about 5.5-5.75% APR on a 30 day fixed rate amortization, and around 6.0% in 2012.

Check out this “infographic” from the Mortgage Banker’s Association’s marketing collateral:

2011-Interest-Rate-Forecast-Infographic-575x719

6.0% is still extra low – I bought my first property in 1991 with a nearly 10% APR loan…

According to a presentation that I heard from some Citibank Mortgage folks last month, mortgage originations – “purchase loans,” not “refinanced” loans, are forecast to be up this year by 40% over 2010, but total originations will be down about 40%. That’s a big shrink in demand, in the face of historically remarkable affordability. What does this all really mean for Sellers?

Well, Sellers will continue to be challenged for years to come and more Sellers will fail at listing their properties, than succeed at causing the sale of their properties, for the foreseeable future.

Now, buyers who choose to wait for further price declines are also gambling with interest rates – the Citibank folks emphasized:

* If the interest rate goes up 1%, the monthly payment will go up 10%.

* What is more likely – home values dropping another 10%, or interest rates going up another 1%?

* With current interest rates and the tax write off available to a homeowner from the federal government, the effective interest rate is closer to 3-3.5% APR. That is immense buying power.

Historical_Mortgage_Rates_2011-02-07

Act now if primary residence home ownership is in your plans.

Act now if investment property is, or should be, in your plans.

Act now or look back and regret it later…

For more reasons on why now is a prime time to buy a home, contact me and I’ll send you a free ebook!

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