No April Fool Joke

This is not an April Fool post. Rates are moving up and moving quite rapidly. Every day for this week rates have crept up the cumulative total is about 1/4% or slightly more. There are two things any reader should consider. First rates are moving up in spite of the FED stating they would try to keep rates down for a bit longer since the recovery is not coming along as well as had been expected. So even iwth the FED pressuring the market, rates are inching upwards. That is a bad sign. It means that whatever you have in mind, refinancing, consolidating, or purchasing, you should get on with it quickly. Second, the Federal Tax Credit program is going to end on April 30 and if you are planning to purchase, you should do it quickly, before the end of the month. Many are going slow, planning or hoping this will be renewed the second time. I think it will not be renewed and that anyone who does not buy before April 30 will have thrown away money. For you sellers, that means that your home will drop another $8000 after April 30. Since the net price to most potential buyers has been seen as $8000 less than the actual price, the actual price will probably have to fall to match the prior actual or net price. So you sellers, if you get an offer this week, take it. In May, that same offer will be $8000 less.

What are we to make of these two points? That there is some urgency in whatever you plan to do. If you are trying to sell, be quick about it or lose some money. If you are trying to buy, you will lose the tax credit but then will probably try to negotiate the same lower net price as with the tax credit but will meet with more resistance so try to do it now. If you plan to refinance to consolidate or for any other reason, rates may be rising so move quickly to apply and lock the rates now.

The tough economic times are not over, the recovery has not started for most people. Most of us do not feel better about our economic lives today than we did 3 months ago. We may have a vague sense of light at the end of the tunnel, but it may be an oncoming train. Beware of that light. Do not wait for rates to fall, they may not fall at all, we very well may have seen the bottom of this rate cycle. I hope we have a few more months of low rates, but remember they are artificial and are being held in place by a weakening system of FED hopes and moves. The rates will go up and sooner rather than later. When the bond market gets free, the realization of the huge federal borrowing that will occur over the next 5 years will cause the cost of borrowing for everyone, including the Federal Government will go up sharply. The days of rates below 5% will be a fond but growingly distant memory.