So, where are rates going from here?
Many of us think that we will be in this low interest rate environment for a long time.
Federal Reserve Chairman Jerome Powell was quoted as saying “We think that the economy’s going to need low interest rates, which support economic activity for an extended period of time—it will be measured in years. However long it takes, we’re going to be there—we’re not going to prematurely withdraw the support that we think the economy needs.”
So, if you believe the Fed chairman, rates will stay low, although, bear in mind that the Fed controls short term rates to an extent but certainly does not have control over longer term rates and broader market forces. If you believe the writer Norman Cousins who said “History is a vast early warning system”, low interest rates are not going to last forever. It might be foolish on my part to bet on a writer rather than the chairman of the Federal Reserve, but that’s exactly what I am going to do. Call me old fashioned, but I don’t believe that governments can print money with no consequences—that you will be able to get a 30 year mortgage at 3.25% forever and this time it’s different…not likely. Housing affordability is a function of financing costs, income and home prices. One can argue that each of these factors could cause stress on the system going forward. But for now, even with this recent increase in rates, many of the factors that have created demand for single family housing remain in place. Owning your own home is still theAmerican dream and housing stock is still in short supply. Just understand that rates weren’t always this low and might not stay like this forever.