A History of U.S. Mortgage Rates.

Reproduced with the permission of Mortgage-X.com

By Troy Corman, t2 Real Estate

We've never had it so good - that is, if you're a buyer of real estate right now. If you're a saver, it's not so good.

As you can see in the orange graph in the above chart, 30-year fixed rate mortgages are at their lowest levels, basically ever. Right now, if you can get a mortgage at 3.5% on a $250,000 loan, principal and interest costs will be around $1,122 a month. Bumping the rate up to the 6.5% levels we experienced in 2006 and 2007, and the monthly costs rises to $1,580 a month. That's an extra $5,496 a year. We've been lulled into thinking that these low rates are the norm, but as we can see above, nothing could be further from the historical truth.

As mortgage rates begin to inch up, it isn't likely that they'll return to the historic low levels. U.S. banks reportedly have $1.5 trillion (with a "T") parked at the Fed. According to this article, Why Inflation In 2013 Is Imminent, the money is not being disbursed into the economy because it's more difficult for the banks to make money with the government-manufactured interest rates. 

Sooner or later, the spigots will be turned and the money will flow. In fact, it's already happening in the private investor market. Money is flowing into construction and home building. Talk to a local home builder and you'll get the real story on inflation. Material, land and labor costs are all rapidly rising. As are home prices - nationwide.

Speaking of hints of inflation, some farm land prices have doubled in the last five to ten years. During the weakest recovery in the history of the United States! And the U.S. stock market recently hit a multi-year high.

Experts agree that more inflation is imminent, but opinions vary on it's arrival date. It's most likely to occur when bond investors see the value of the dollar decline more than the interest rates they're being paid. Then, they'll no longer buy bonds unless they're offered better rates of return, or higher interest rates.

How does inflation affect you? Well for starters, you'll pay more for gas, food, clothing and shelter. It's called the hidden tax, because no socio-economic class can escape it.

To get an idea of how higher interest rates could affect your home buying plans, check out this mortgage rate chart below.

Monthly principal and interests costs on a $250,000 30-FRM at various interest rates.

3.5% - $1,122

4.5% - $1,266

5.5% - $1,419

6.5% - $1,580

7.5% - $1,748

8.5% - $1,922

9.5% - $2,102

If I can help answer any questions regarding your real estate buying or selling needs, I'd be happy to help. Reach me at 214-690-9682.

$275,000 loan at 3.6% on this home = total monthly costs of about $1,875.
View photos and details at 6541Patrick.com

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.

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Will the Dollar Decline Inflate Real Estate Prices?

By Troy Corman, t2realestate.com

Don't look now, but your cash accounts in your bank, 401k, and IRA are now worth about 7% less than they were 2 months ago - when compared to currencies in 6 other major countries. In fact, today the dollar is flirting with dropping below the 15-year record low of 80.90 yen.

Inflation is already apparent on the farm. As gold, silver and agricultural commodities sky-rocket, prices of Texas farm land continue to climb. Wheat and corn are both up 34% in a year, while milk has risen 32%. The result has been rising prices on Texas farm land.

Gold and land have long been a hedge against inflation. As those with cash see their savings evaporate in very low interest-bearing saving accounts, some turn to real estate, and rental real estate, for inflation hedging and tax deductions. That's what makes real estate a more practical investment than the stock market, in my view.

Speaking of the stock market, TV pundits continue to promote the bull market, yet in the 30 days prior to October 18th, corporate insiders (company executives) HAVE SOLD SIX TIMES as many shares as they've bought. They've sold $3.5 BILLION of stock, and bought a mere $236 MILLON. What do they know that Joe Public doesn't know?

One thing we do know is that Ben Bernanke is determined to prevent deflation and falling prices. Look for him to continue to rev up the printing presses and flood the economy with more dollars, making the dollars you have worth less.

Inflation is the enemy of mortgage rates. The following is quoted from Adam Quinones from MortgageNewsDaily.com, "We do however know that the Fed is looking to spark a little "Demand Pull Inflation", and we also know inflation is the enemy of mortgage rates. While demand pull inflation won't ignite immediately, if the Fed's QEII plan is as successful as previous alternative policy strategies (which were intended to stabilize the economy, and they did), mortgage rates will eventually rise, and it will happen on the slightest hint of consumer led inflationary pressure or sustained job creation. I'm not even going to venture a guess on when that might happen though. Traders, economists, and analysts alike are still operating in a very reactive manner. Outlooks are constantly changing as the economic and political environment evolve. Let's see what the Fed says on November 3rd and go from there...."

For tips on how real estate can fight the ravaging effects of inflation, contact Troy Corman.