Interest Rates
Interest rates for mortgages have held historically low for the last two quarters of 2019. Everyone wants to know, “how long will this last?”. We know that the Federal Reserve uses interest rate hikes to slow down the economy in order to help keep housing prices in check and from escalating too fast.
Here in Nashville we’ve experienced an average housing value increase of 6% for the past several years. Will this growth rate continue? In the long run, yes. In the short run, probably not. Which is expected and a healthy economic intentional slow-down.
For example, if housing prices in select Davidson and Williamson county areas continued to rise at the same rate, the average family of four is looking to spend $800,000 in order to move into a family home. Even with excellent credit scores and interest rates that sale price puts their mortgage at roughly $3,800 per month. This sets the annual income requirement at $180,000 in order to cover the mortgage expense. This in turn puts pressure on business’s to provide higher salaries and yet remain competitive with low product and service prices. You can see how this equation is tough to balance and why the Federal Reserve tries to slow down the economy at strategic points in time without making too big of an adjustment that causes the economy to take a sharp nose dive.
Freddie Mac predicts that the 30-year fixed-rate mortgage will drop to 3.7% at the start of 2020 and remain there through the second quarter.
If you are planning your retirement with the sale of your home and a shift into a downsized property, the first quarter of 2020 will be a great time to lock in the lowered interest rate in order to become debt free for less.
If you’re a first time home buyer or needing to move up into a larger space because of a growing family, the first of the year will be a good time to make the move. If you wait there’s always the chance that global events may force the Federal Reserve to adjust their lower and hold strategy. Look for the rate decrease in January of 2020 and get your finances in order ahead of time to lock it in.
