Mortgage Rates Spike — More Clouds on Horizon for Real Estate in Miami and Coral Gables?

posted on April 7th, 2010 filed under: Real Estate Market Data, Real Estate News

Well, that was fast.  Mortgage rates wasted no time going higher, as foreshadowed in recent posts on the rising 10-year Treasury yield and the end of the Federal Reserve’s mortgage backed securities purchasing program.

The Mortgage Bankers Association reported that mortgage rates jumped an eye-catching 27 basis points (0.27%) in a single week, to an average of 5.31% for the 30-year fixed.  That’s the biggest jump since rates spiked last June.

So what’s your strategy if rates keep rising?  Will you buy in order to lock in a lower payment?  In the 1970s, rates went through the roof, and property values rose the whole time.  Real estate can be a good hedge against inflation.

On the other hand, in the 2000s, rising rates sent property values into the dive that brought the financial system to its knees.  Higher rates could mean another leg down for real estate prices, especially in markets like Miami and Coral Gables where the fundamentals — oversupply combined with unfavorable pricing relative to incomes, rents and historical valuations — remain out of whack.

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posted by // This entry was posted on Wednesday, April 7th, 2010 at 9:39 am and is filed under Real Estate Market Data, Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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