The U.S. Mortgage Market in 2007 - Historic Lows May Equal a Great Opportunity

Posted by  on Apr 16, 2009
The U.S. Mortgage Market in 2007 — Historic Lows May Equal a Great Opportunity

The housing market has seen an increase in property value over the past few years. Currently many people are trying to cash in on their investment before the property values begin experiencing sharp predicted declines. This leads to a great opportunities for buyers to wait for the price of houses to come down to the price they are willing to pay. People need to cash in on their investments to pay off loans taken out as well as to support their lifestyle, so they need to sell their homes and they need to do it relatively quickly, thus they will lower the price of the house to ensure they do not loose money on their investment.

Why has the Market been so Low?

After the events of 911 the government wanted to keep the economy thriving and flowing smoothly so they decreased interest rates to encourage borrowing. This lead to an influx of “investors” taking out loans to purchase homes which they thought would dramatically increase in value. Now that the economy is starting to head towards a recession they all want to settle their investments to ensure the most amount of profit is secured. Although the values of the houses are relatively high, the idea that not many people will want to take out loans scares off “investors” because they know not many people will be making large purchases such as homes. Therefore they need to get rid of their property before interest rates get too high to prevent easy liquidation of their assets, thus they will lower their prices to suit buyers needs.

Are We in for a Surprise?

The government controls interest rates to encourage or curb consumer spending. During times of prosperity the rates are raised because people can afford the higher rates. During times of recession the rates are lowered to encourage spending. Because the economy overall is thriving the rates most likely will increase, similarly to how the rates on student loans have recently been increasing. While nobody can be certain the rates will increase (in face the government has said rates will remain the same) most economists predict in the next fiscal quarter we will see rate increases to offset the large amount of spending that has been rampant in our economy.

How to Take Advantage of the Low Interest Rates

The best options at the moment are to refinance for a low rate which most likely won’t come around again for a long time, or to perhaps buy a house and lock in on a fixed rate mortgage while the rates are still low. A Cash Back Mortgage is also an option to lock into a low mortgage rate, which would allow you to consolidate debt or use the money to somehow invest in your personal finances.

Planning for the Future

Depending on your situation there are a few different options to deal with the prospect of higher interest rates. Currently the housing market is declining so selling your home and buying a new house should be a last resort. Refinancing to lock into a low rate and investing in the houses investors need to liquidate are some of the best options currently. Especially with the downfall of sub prime mortgage lenders, many houses can be purchased for very low amounts of money at wholesale events because banks need to liquidate them to regain some of their lost investment.


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