Historic 30 Year Mortgage Rates

In a previous post I describe how monthly payment affordability is more sensitive to rate than price, and how market timing when buying a home may not be as important as one might think. Some folks within a discussion thread (in an online real estate community called Trulia) have brought up a good discussion point… one worth looking into.

Here is an excerpt: “When you buy a home, that purchase price/principle on the loan is locked in forever. However, even fixed rate loans’ interest rates change when you refinance. I’d rather buy a home at a low price with a high interest rate. Five or more years into the mortgage I should be able to refinance that lower principal at the now lower rate.”

Living through five years seems like a long time, so people often think that what we experienced recently will come back around again. You may be surprised to learn that the last time before 2001 that mortgage rates dipped below 7% was 1969, or 39 years ago. And the rest of the time the average was closer to 9%, with high’s of 15%-18%. This graph tells the whole story:

[Reproduced with the permission of Mortgage-X.com, a great source for these types of charts]

I am not saying that now is the right time for everyone to jump into the market… and I’m not trying to sell you anything. As my other posts reflect, I am actually quite bearish on the market right now, especially the $750k to $2m pricing tier. But if first time homebuyers are out there strategizing how to get in, it is important to realize that every scenario is as unique as a snowflake… and a good professional can really help people figure out where they stand. Most experts I have studied say the best time to buy is when everyone else thinks the sky is falling. And if it hasn’t fallen yet, it sure is cloudy.

Meantime, a lot of evidence points to a firm market bottom for select properties in the $250k to $500k market segment… i.e. the segment that attracts most first time homebuyers.

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