The move made by Ben Bernanke a couple of weeks ago to keep the bond buying going caused home values and interest rates both to drop. This recent action taken by the Fed to continue the bond buying will cause supply and demand to regain balance.
This move will give the average home buyer an opportunity of a life time to buy a home at a historically low interest rate and price.
In a normal economy, lowering interest rates, stimulates buying. However, mortgage interest rates have been so low for so long, it created home stagnation, which perpetuated all the toxic loans. No one was buying homes, waiting for the bottom in home values and the bottom in mortgage interest rates. This allowed the inventories of homes to exceed demand, resulting in prices dropping to these historic lows. .
I think the Fed realized the negative impact they made last spring, on our weak economy. Just the mere mention they were considering haulting the bond buying program created mass hysteria. Fed bond buying is a way to put cash in the public hands to spend, in essence to boost our capitalistic economy. The dark side of this procedure is inflation. Every dollar printed and put into our economy divides the value of each dollar.
Though I believe the Fed made a wrong decision, I embarrassingly, welcome it. The notable mention of haulting the bond buying, caused interest rates to spike up around 1%! This caused a real estate buying frenzy that mirrored the likes of a shark in blood infested waters. Prices were entered into the MLS like an auction opening bid and homes were selling well above asking price in a day or two. The average home buyer was kicked to the side as institutional buyers came out of every crack and crevice and dumped billions of dollars in cash into real estate, gobbling up supply. When demand for homes exceeded supply, home values jumped. According to the NAR, 12% in July alone and 20% up from only a year ago!
Don't read me wrong, the QE3 bond buying needs to stop, or we'll have inflation that will give us third world status. But the change should be slowly phased in so that middle class Americans can bite off a piece of the American Dream pie and grab some of the quantum leap equity that only those willing to take the chance now will enjoy.
If you are in the market to buy a home at a historically low price and interest rate, now is the time! When the free money ends, there will be no turning back.
Curtis Rudolph Realtor®
www.CurtisRudolphRealtor.com
www.Facebook.com/SouthTampaLuxuryProperties
Realty Direct Tampa
Note: Please consult your financial adviser before considering real estate as an investment.
Saturday, September 28, 2013
Friday, September 27, 2013
Flood insurance rate hike causes massive beach home...
The new flood insurance law goes into affect October 1 unless there is an 11th hour stay of execution. Signed in 2012 was the Flood Insurance Reform Act. This law eliminated the government subsidies put in place to make flood insurance more affordable.
The media says the new law will drive beach home prices up!
What?
How does the increase in flood insurance premiums of an estimated ten fold, drive up home values?
What I do see is the little Ma and Pa beach cottages and houses, that line our beautiful Florida beaches will go bankrupt. And the investment heavy, high rise motels and hotels will have a monopoly for beach tourism and pass the new hefty profit bill to you!
I am advocate for smaller government and let the free markets be free, but this type of change should have been better planned. It's like being rear ended by a car doing 100 mph and you are only doing 10. This is a serious accident.
Just saying!
Curtis Rudolph Realtor®
Realty Direct Tampa
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