The Orginial Realty Investing Magazine
Where are interest rates headed this year? What will it mean for you?
One of the biggest expectations of 2017 is changing interest rates. How high will they go? What will it mean for real estate buyers, owners, sellers, and investors?
While there appears to still be a lot of uncertainty around exactly what Trump will be able to accomplish, and how quickly, everyone seems to agree that interest rates are heading up. That’s not necessarily a bad thing, but it should inject some urgency into the market, while creating upside potential for the economy and debt investors.
We’ve been spoiled with crazy low interest rates for a long time. At the beginning of 2017 mortgage rates were still around half of their long term average, and only about a quarter of previous highs. While the Fed has surprisingly held off on raising rates so far, speakers for the Fed have indicated at least several hikes will be coming in 2017.
How high will they go? Projections continue to vary widely, but the reality will probably be higher than most individuals in America anticipate. NAR has forecast 30 year fixed mortgage rates hitting 4.6% by the end of 2017. This is an opinion seconded by Kiplinger’s interest rate forecast. However, Forbes notes that these rates had already hit 4.25% by February 2017, and estimates they could hit 5.75% within the next 10 months.
A jump of this size will certainly stun home buyers that have been dragging their feet in making offers. Yet, it is also likely to encourage mortgage lenders to make more loans. That in tandem with Trump’s plans to ease lending should mean we’ll see plenty of acquisitions in 2017.
However, things could become a little worse for struggling owners and sellers. Those that are already having a hard time paying their bills are going to find higher rates hit them on all fronts; from the grocery store, to the gas station, and to housing payments. That will hit debt to income ratio for refinancing, and any potential buyers for their homes if they need to sell. House prices are up significantly, but they may have to discount their prices to counterbalance this, and big institutional lenders and servicers are unlikely to be helpful.
On the other side of this is the massive opportunity for investors. There are houses to be flipped in a rising asset price environment. Note holders will also find that borrowers are likely to do everything possible to maintain their loans with modest rates. For ethical investors there will be substantial opportunity to add great value, build loyal borrower relationships, and generate even greater income and wealth, while serving buyers, sellers, lenders, and other investors.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund