I’m hearing a lot of buzz about people trying to time the market from a pricing perspective.  Reminds me a lot of people trying to time the stock market.  Looking closer at the fundamentals, most economists agree the market is bottoming out and prices will remain stagnant over the next 3-4 years.  This will be largely due to continued heavy amounts of distressed inventory hitting the market (2.4million foreclosures in 2010 according to Change.org).

However with the lack of building taking place we are seeing significant inventory contraction which will buoy prices at about where they are now, at least in our primary market here in Memphis.   What I do see though is a move towards interest rate increases.  It started with the Fed raising the Discount Rate in an unexpected move and today Kansas City Fed President Thomas Hoenig said rates need to rise sooner, rather than later.

Most recently clients of Investor Nation have been receiving fixed 30-year 5.5%-5.75% interest rates on refinances of investment homes and 5.25% on purchases with 30% down.   Locking in at low interest rates increases the return on money borrowed in an environment where rents have been in slight decline.

Consider the current rates and know that the move towards higher rates has already begun.

Tags: economists, foreclosures, Interest Rates, inventory, prices