Housing will party like it's 1999 again.
Fayetteville, North Carolina (PRWEB) November 12, 2016
Top three reasons why housing prices and interest rates will rise in 2017, by Andy May, AAFMAA Mortgage Services COO. While few pundits ever get it right, here's a short "listicle" of reasons why housing prices and interest rates will rise in 2017. Of course, the usual disclaimers apply that no one can predict the future.
First, with a strategy to create new jobs and block the export of work to foreign countries we would expect to see wage growth go up.
Wage increases are the number one factor (as high as 65% causation according to Andy May) for home price growth. This is the exact same formula that worked in the 1990s. The result? It's a great ride until it ends with a bang — think the Nasdaq Composite implosion of 2000, the year in which, according to Nasdaq.com, eight out of ten of the biggest monthly declines in Nasdaq Composite’s history occurred. The housing bubble ruptured six years later and concluded with an epic national home price decline of 33% between 2006 and 2009 according to Case-Shiller's housing price index.
Secondly, with a Republican sweep of the House, Senate and Executive branches there is likely to be a mandate to expand jobs. Job expansion means interest rate increases. The best time to refinance really is now, before 2017. For nearly 30 years, Andy May has heard this statement by the vast majority of Realtors, "the best time to buy is now." According to May, "this is the first time that I believe all roads will lead to higher home prices and higher interest rates."
Long term interest rates in the United States for the average American citizen are at historical lows nearing 3% on fixed rate debt. Most sovereign nations can't borrow at these rates. Rates have nowhere to go but up. Saudi Arabia borrowed internationally for the first time at rates that are higher than the average American citizen borrows for 30 years. One month LIBOR has increased from 0.2% to 0.55% year-over-year. The ten year Treasury has decreased by nearly 0.5% during that period.
Third, mean reversion will come into play. Long term rates will go back up along with additional increases in short term rates as the US economy grows. Third quarter 2016 GDP approached 3%. If this continues in 2017, rates will go up.
Now is definitely the time to lock in low, long term residential mortgage interest rates.
AAFMAA Mortgage Services. 844-422-3622 (844-4-AAFMAA). Equal Housing Opportunity Lender. http://www.aafmaa.com/mortgage. Physical location 639 Executive Place, Suite 203, Fayetteville North Carolina 28305. NMLS license number 1423968. 103418.