Not long after the residential mortgage crash started many were predicting that the very same thing would happen in the commercial property markets but so far, that has not been the case. That is not to say that commercial properties have not lost value or that those who owned commercial properties have not felt the pain of those losses. However, the mass foreclosure of commercial properties has not come about as many predicted.
One of the reasons this has happened is the Federal Reserve has gotten very involved with those companies that want to purchase commercial properties from failed banks and have offered them zero percent interest loans to do so. Another type of company has also helped and these are the private equity firms that have bought out some struggling real estate owners and have renegotiated their debt to put them on the path to real recovery. This is a perfect example of government and businesses working together to solve a problem. It’s just too bad they haven’t done as good of a job when it comes to residential properties.
At the beginning of the year (2010) it was predicted that once the Federal Reserve stopped propping up the mortgage industry at the end of March along with the end of the First Time Home Owners Tax Credits interest rates would raise considerably. What no one knew at the time this prediction was made was the coming fate of the Euro and how that would affect investments in the United States. It’s just one more indication that we truly live in a global society.
When Greece announced the current issues with debt and their inability to repay many in Europe turned to invest in US backed securities, which are considered a safe investment throughout the world. After Spain and Portugal announced that they too are having issues it has just exacerbated the Euro problem and pushed even that many more investors toward US backed securities, which in turn has kept interest rates below where they were expected to be at this time.
For the current buyer or refinance client this simply means that interest rates continue to be low, which makes it a great time to buy or refinance your home. For everyone it just shows us all that it is very hard to predict interest rates and other trend in an ever evolving global world.
One of the biggest questions I am getting these days is about where interest rates are headed. Though there is no way we can tell from day to day there is a consensus that interest rates will rise over the course of the year. The Federal Reserve has stopped purchasing toxic mortgage assets as of the end of March 2010 and there was a bit of a rise for several days. However, the rate has come back down to the 5% range, which is very good.
What we don’t know is when rates will start increasing or how far they will go before they settle. We do know that rates are far more likely to go up this year then down and a good economy normally has a rate that averages between 7 and 8%. I’m sure while we all would love to see the economy improve, know one likes the idea of rates being in the 7 and 8’s again. However, at some point in the future, they will go up. The question is; will you be able to take advantage of the still historically low rates before they increase? If you are ready, let me know. I will be more than happy to introduce you to a good lender who can help you get qualified.
In reading over many recent publications it looks like the interest rates will be at their lowest during the first quarter of 2010. The Federal Reserve along with additional government programs that have helped keep interest rates low will be phased out over the next three months in hope that the private markets will come in and take over where they left off and this is what needs to happen to insure growth in the economy.
However, it is expected to be a bit bumpy since no one knows how much or exactly when the private markets will jump in and take up the slack. That means that interest rates may be (some say will be) rising throughout the remainder of 2010. Of course, since there are so many unknowns, no one can say for sure what will happen exactly. A few predict that the government will have to get involved again before it can totally let the markets go and we will all have to wait and see as the year progresses. The one thing everyone seems to agree on it that for those in the market to purchase a home; interest rates will be at their best in the next few months.
The Federal Reserve has met for the two days earlier this week in order to discuss the next move in regard to interest rates as well as whether to maintain some of the aggressive programs that were put in place this past year to fight back the devastating consequences of the failing economy. They did announce on Wednesday, August 12, 2009 that it will keep short-term interest rates at a record low in order to further stabilize the U.S. economy. Though this may seem to be a bad sign, the Fed also signaled confidence in the recovery, saying economic activity is “leveling out.”
This is just another step toward our economy coming back around though everyone does expect the progress to be slow. If you go back to other economic times you will note that unemployment is one of the last areas that rebound so we may be seeing that number rise even more before it finds its tipping point and dips into acceptable levels once more. This is much better news than we were getting six months ago and there will be challenges ahead but as a nation we are going in the right direction.
In a surprise move on Tuesday the Fed’s cut was 75 basis points or .75% down to a level never seen before in our history. In a statement put out by the Fed it included the following; “The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
There are rumors of rates falling into the 4.5% range in the near future and remaining low throughout 2009. However, as always, there were rumors not 6 months ago that we would be paying $5.00 a gallon gas by Christmas this year. I filled up yesterday and paid $1.42 a gallon. If you are interested in purchasing a home in the near future and can qualify, it is a great time to buy a home.
