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January 2, 2016 11:14 am
by John DeCosta, Keller Williams Portland Premiere 503-702-0856
When I started in the Real Estate Field in 1976, I was a graduate student at the Business School at the U of O. Interest rates were extremely important to all predictions of the coming real estate market conditions. It seemed that back then the cost of financing a home was a critical ingredient. Today rates are so low that the predictive value of interest rates has lost most of it’s luster. Rates are still part of the discussion, but supply and demand for homes is the predominant discussion. In the Portland-Vancouver metro area, the market produced about 7,000 new single family homes in 2015. That was about half of what was needed. The prices continue to move up. Interest rates did not affect the trajectory of the increasing market.
In 2016 we may have interest rates rise to a level that they will have a measurable impact on the market. Take a look at the chart below to see where rates have gone over the last 75 years. What an interesting chart.
Maybe you can remember the bad days in early 1980 when mortgage interest rates approached 20% per year.
We have people today who are scared that rates may hit 5% in the next few years. We also have people who say that the markets will never have 30 year fixed rates ever again. But we have 30 year fixed rate loans today at around 4.25%. You can lock in that rate and then not worry for the next 30 years. If inflation takes off, you can pay your loan back with greatly inflated dollars. So why aren’t we seeing people flocking to the market to lock in the current rates. I am just an observer, I would never attempt to figure it out. But we see that many people are paying cash for their home. They would rather have their funds invested in a home than in the stock market, where one of 2015 best stocks, AMAZON trades at 900 times current earnings. They are investing in growth, and they are a great company but net income of $78 Million on 100 Billion in sales is odd. And their stock went up over 100% last year.
Well we will soon see where interest rates are headed. The Fed tweaked the discount rate and it may set rates upward. We will see you in the market, if your family is one of the lucky ones to grab a great home at a great price, and with a tiny interest rate to boot.
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1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
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2.00
2.25
2.85
3.00
3.25
3.25
3.50
4.00
4.50
4.34
5.00
5.00
4.50
4.50
4.50
4.50
4.92
6.00
6.00
6.60
8.50
8.50
6.29
5.79
9.94
12.00
10.05
7.25
7.75
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2.00
2.00
2.44
3.00
3.00
3.00
3.00
3.50
4.00
3.50
4.00
4.50
4.50
4.50
4.50
4.50
4.50
5.00
5.50
6.00
6.95
6.92
5.28
4.75
6.00
8.85
7.07
6.35
6.25
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1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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11.55
15.55
20.35
20.50
16.56
11.16
13.00
10.61
9.50
9.07
10.50
11.50
10.11
9.52
6.50
6.00
8.50
9.00
8.50
8.50
8.50
8.50
9.50
9.05
4.75
4.25
5.15
7.15
8.25
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7.93
11.54
11.12
15.75
11.50
10.50
11.00
9.50
7.50
7.50
8.50
10.50
10.00
7.21
6.00
6.00
6.00
8.50
8.25
8.25
7.75
7.75
8.50
4.84
4.25
4.00
4.00
5.25
7.26
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2007
2008
2009
2010
2011
2012
2013
2014
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8.25
6.98
3.25
3.25
3.25
3.25
3.25
3.25
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7.33
3.61
3.25
3.25
3.25
3.25
3.25
3.25
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This table shows the yearly high and low annual percentage rate for Prime
Rate from 1949 to present. The average daily rate for the month with the
highest average daily rate during each year is shown in the High column. The
average daily rate for the month with the lowest average daily rate during
each year is shown in the Low column. |
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