by Sofia Yarberry

It is common knowledge that the housing market was hit hard by the recession back in 2008; therefore, to assist in stopping the market from crashing completely the Federal Reserve (Fed) stripped interest rates down to 0%.

For the past six years as the economy, including the housing market in Palm Springs, CA, regained it’s national foothold once more, the Fed’s interest rate has remained at 0%. However, that is about to change. As the foreclosure rate is down to .07% and economic growth is on the rise the Fed has announced that they are going to ease in an interest rate of around .25% as early as this fall— speculations range from as early as September to as late as December.
Stanley Fischer (U.S. Federal Reserve Vice Chair) stated while speaking in Israel on the topic that, “If the (U.S.) economy is growing very, very slowly we will wait. If the economy is growing faster we will do it quicker.” Either way it appears that the Federal Reserve board predicts that the interest rate should be around 4% within the next three years. Although instinctively this appears as “bad” it is important to note that the hike in interest is a testament to a strengthening economy that can handle such an increase. As chief economist for First American, Mark Fleming, said in Forbes Magazine, “Housing experts are right that rising rates crimp housing affordability and therefore slow demand. What they miss, however, is that a rate hike signifies that the rest of the economy is doing well. The housing market should not be seen in a vacuum—it must be viewed in the context of the larger economic recovery.”

Now that interest rates are becoming a reality to the housing market, it doesn’t take a professional to point out that 0% interest is better than the .25% interest the market is heading towards. So for all the interested buyers who have been on the fence now is the time to commit.

For instance, for a house like this one in Palm Desert 72790 Calliandra street, listed at $589,000, the (assuming a 20% down and today’s 4% rate)  the monthly payments would be $2,863.12, where you would, over the life of the loan, pay $338,649.11 in interests with a final total payment of $1,030,724.11.

Now with a simple .25% rate increase, your monthly payments would go up slightly to $2,931.56,s which would bring your cost of interests at $363,287.48 for the life of the loan, and $1,055,362.48 for your total payments.

A simple quarter point increase will make the final total price of your house go up by $25,000!

So why wait? The reality is that there is a pending hike in interest rates and regardless of how much it’s going to be it will obviously be more than the current 0%… and will be most likely more than just a quarter point increase.

Now is the perfect time to buy and save hundreds to thousands of dollars on a new home or the vacation home you’ve been thinking about. Check out some of the gorgeous desert homes available now at pshomes.com

 

References:
http://www.forbes.com/sites/realspin/2015/04/07/raising-rates-can-be-good-for-the-housing-market/
http://www.reuters.com/article/2015/05/23/usa-fed-yellen-idUSKBN0O721P20150523
http://www.businessinsider.com/r-feds-fischer-too-much-weight-placed-on-feds-first-rate-hike-2015-5

 

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