How Long Will Interest Rates Stay Low?

While rates are still historically very low, they have been ticking up a bit.  I am finding some slow down with investors, who were used to having double digit net returns.   It seems like it really comes down to the numbers and what makes the most sense for investors, sellers, and buyers.   How long will the low rates last?  What changes will this bring about in our Phoenix Metro area real estate market?  
Looking for other thoughts on this topic and to share. 
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July 18 2013 - Scottsdale
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Rates have already started to go up and once this happens, our market will shift from a seller's market to a neutral market!
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July 18 2013
So Cal: I think we are getting to a wait and see market. Buyers are feeling the pressure of maybe I can-maybe I can't buy this year. Some of my buyers have decided to back away from all of the competition and see what the next couple of months brings. Interest rates are still no where near what they were back in the 1980s when 9% was considered average. But, rates today are making some buyers think twice.
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July 18 2013
Interest rates have been consistently rising for the last two months or so.

Here are two links to blow posts I sent out to my buyers giving them a heads up and then confirming my beliefs via Fannie Mae stats that were released and referenced to on CNN.

http://pwrc.me/fed-minutes-indicate-that-qe-may-begin-tapering-purchases-as-early-as-june/

http://pwrc.me/mortgage-rates-jump-to-4-46-2/

Bottom line, the longer you wait the higher you will pay. Keep in mind that for every $100,000 purchase price of a property a single percentage point increase in the interest rate will cause your monthly payment on a 30 year fixed rate mortgage to increase by around $56
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July 18 2013
Profile picture for Pasadenan
People are short sighted and think 1984 logic... rates going up, they are still going up and will keep going up and were always going up....

It is "false".  You are seeing a delayed reaction to the fiscal cliff tax policy change at the beginning of the year, that caused an unexpected windfall of tax revenue in April, that postponed the "debt ceiling" discussion and decision in Congress that was original scheduled for March, but put off until June, and with the tax windfall, is now put off until September.

As congress is polarized on the issue, the risk of defaulting on the government loans and payments will drive interest rates back down again, until Congress does raise the debt ceiling however much they decide and with whatever strings attached they decide.

As far as impact on prices and buying?  The Real Estate markets don't turn that quickly as it takes so long to sell, and agents insist on doing CMA's with "recently sold" that sold more than 2 weeks ago.   And of course, even if they sold yesterday, there still is the delay from Escrow.

And most investors and home buyers are really lousy at calculating risk, and tend to just follow "media hype" which is also outdated.
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July 18 2013
I beg to differ, this has absolutely nothing to do with the fiscal cliff or any of that stuff. The recent climb in interest rates is directly related to the tapering of the quantitative easing program that Ben Bernanke and the federal reserve has been running since the last collapse.

One of the measures of this program is to buy 80 BILLION dollars worth of bonds each month which has artificially reduced the interest rate in the first place. As the tapering or reduction of that amount starts to increase until it is at 0 each month, institutions relying on the bond markets for cash will have to increase interest rates paid in order to obtain their needed funding.

As a direct result the interest rates have began to climb. (immediately following Bernanke's announcement that FED has announced they will begin tapering in the near future) Although they will not climb forever, they surely will until the markets stop being artificially inflated. 
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July 18 2013
Rates are already on the rise.  Although, I'm not sure if we should consider current rates outrageous as in years past they have been much higher compared to what we have to today.
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July 18 2013
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Without a doubt, I agree with Pasadenan.

Alex,
You read too much internet fluff. Having been knee deep it the financial sector since before you were concieved, I can assure you that begging Pasadenan to differ shows your green take on the world around you.
I love that so many Real Estate Agents are experts on the financial sector. Funny how none of the lenders have wasted their time pointing out the flawed logic.  

Good luck!
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July 18 2013
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The announcement that quantitative easing would begin tapering off in 2014 did affect stocks and rates in June, but not May when the rates substantially rose due to the April tax windfall, and as usual, it was complete "irrational exuberance" based on media hype and misunderstanding rather than any real economic changes.  Even the announcement was based on the ONE TIME windfall due to business and individuals shifting this years' profits back to last year to reduce the tax burden.

Here are the charts:
March:


April:


May:

June:


July:


You can "beg" all you want, but it won't change reality.

For more information, see the thread:
Rates on the Move Again.
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July 18 2013
The charts are great however your timeframes for QE news are off.

It was a recent development when FED members began speaking of the bond buying ending in 2014. Prior to that however during Mays FED meeting it was announced that it would begin in June 2013. This caused the jump in rates as well as the pullback in the markets.

During the month of May immediately following the FED meeting Bernanke spoke on Bloomberg and later was confirmed by the FED minutes that the tapering will begin later this year (2013) as early as June.

Check out the link I posted above, I wrote a story on it back in May with respect to the impact on rates rising.
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July 18 2013
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The Fed meeting minutes and Bernanke's remarks were 100% based on the unexpected April Tax windfall, that was 100% predictable based on the "fiscal cliff" legislation passed in Congress on 1/1/13.  The "recovery" is 100% imaginary, and the debt ceiling discussion was only postponed a few months.
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July 18 2013
According to the Mortgage Broker Association (MBA), by the end of 2013, the interest rate on a 30-year fixed mortgage will be at 4.4 percent. And by the end of 2014, they see the rate at 4.6 percent. Hope this helps. If I can be of any more assistance contact me via my agent profile.
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July 18 2013
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4.5% was seen on 7/5/13  (30 yr fixed average quote, <80%.LTV, 740+ FICO, between $200k and $416k loan value).  It is meaningless to give one number with no qualifications.   The rates change more than that in one month time frame just due to typical economic news, such as unemployment claims, net new jobs, consumer price index, retail sales, consumer confidence, GDP, European country debt, asian GDP...

Here is a link to an economic calendar for some of the expected U.S. economic news (no items for today):
Bloomberg Economic Calendar.

Lets not forget, the Federal Reserve is still intentionally subsidizing mortgage interest rates, and have stated they will continue to do so until the unemployment level is down to their target range.  Has anyone seen any real change in the unemployment numbers yet?  What economically needs to happen to have fewer people looking for work?

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July 18 2013
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Bernanke's comments today:

He described future policy changes in three stages.
1) The first stage in pending policy change is ending asset purchases which depends on substantial improvement in the labor market.
2) The second stage would be when unemployment reaches 6.5 percent and inflation still is under 2.5 percent, then there will consideration of raising policy rates.
3) The third stage will be normalization of policy rates.

Bernanke anticipates a long period of accommodation after asset purchases end. He does not see tight policy any time in the foreseeable future.

He noted that the Fed must key an eye on mortgage rates and affordability.

He repeated that QE will end by mid-2014 if the recovery tracks as anticipated.

Bernanke indicated that the Fed will not wind down its balance sheet until after beginning rate hikes. The Fed currently is not planning to sell any mortgage-backed securities at this point.

Regarding fiscal policy, Bernanke noted that monetary policy is not a panacea and that the Fed would welcome help from fiscal policy as the recovery is not as strong as preferred. He also stated that it is not the Fed's place to try to force Congress to take a given action but to implement monetary policy in line with what it is given in terms of fiscal policy.

On whether there will be tapering announced at the September FOMC, Bernanke said that it is too early to determine. He noted that economic data have been mixed since the last FOMC.
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July 18 2013
If only we could all foresee into the future to better determine the answer to that question. Unfortunately, nobody really knows if rates will increase or decrease. Everything is going by the seat of your pants right now and alot of it is based on QE3 and whether the government will continue to, for lack of better terms, pump fake money into the US system through their wonderful 85k per month bond buying program. Bernake, the FED chairman, spoke again today and it seems that when he starts talking about the economy getting better and how they are going to slow the Bond buying program the stocks go down, investors run to pull money out of Bonds and then the rates increase. I have been watching daily. We just have to keep our prayers high, but bare in mind rates are still great where they are now. It isn't at 6% or even close which is a great rate currently. Good luck in your endeavors and I wish you the best

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July 18 2013

There is currently signs of rising interest rates at this time however with the market shaky past there is no way to determine if it will continue to rise or fall.

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July 18 2013
"The Fed meeting minutes and Bernanke's remarks were 100% based on the unexpected April Tax windfall, that was 100% predictable based on the "fiscal cliff" legislation passed in Congress on 1/1/13.  The "recovery" is 100% imaginary, and the debt ceiling discussion was only postponed a few months."

Sorry not buying it,( http://mam.econoday.com/byshoweventfull.asp?fid=455488&cust=mam#top ) highlight of FED minutes never mention fiscal cliff, but wait why would they the federal reserves dual mandates are to maximize employment and moderate long term interest rates... 

As far as being 100% predicable maybe you should run for office, since no one else seems to have seen this coming but you.

Debt ceiling were only postponed a few months?? LOL this has been a can they have been kicking down the street for years just like the BS legislation that was passed hours before the deadline even though they had over 500 days to reach an agreement.

As far as the recovery, not as good as we are let to believe? Maybe. 100% fake, sound like more BS.

But hey lets just agree to disagree

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July 19 2013
Profile picture for Pasadenan
Yes, I will go on record with another prediction....(I've made hundreds here on Zillow, with an accuracy rate of about 75%, you can read them all if you cared)
3.25% average ZMM 30 yr fixed quote (or below) for at least one open market hour (defined as 6 am to 5 pm Pacific Time, Monday through Friday, excluding Federal Holidays), for <80% loan to value ratio, 740+ FICO (middle score), $200k to $416k loan amounts, sometime between September 9, 2013 and November 1, 2013.

(Yes, Congress can kick the can down the road again, but this last kick the can down the road was done for them with the windfall of revenue they didn't anticipate, due to shifting of profits/income from this year back to last year due to lower tax burden last year).

If you heard absolutely nothing regarding the unexpected windfall of Federal revenue in April, then you obviously were not paying attention to any economic news.

No, I absolutely don't care what any Realtor® thinks of any economic issues.  The National Association of Realtors® was responsible for millions of families going bankrupt in 2007 through 2010, and millions of households experiencing foreclosures, and almost a complete economic collapse of over 50 countries, due to their political lobbying of congress and HUD for extremely bad housing and lending policies, and their intentionally deceptive "talking points" they used to try to snow the American public.  And that was completely predictable in 2002, and one Realtor that happened to also be a math professor was making such predictions on Zillow as early as 2007.
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July 19 2013
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I feel like rates will remain low (under 6%) for a couple more years.  There are many factors involved in determining the rates, and it's nearly impossible to predict where they will go, but that's the common expectation.
If rates go up high enough it can slow the demand and slow price increases.  If rates soar to match a hyperinflation type number, pricing could fall.  There is still a lot of demand in Phoenix Metro area with the small upticks in loan rates.
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August 19 2013
 
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