Most reports having to do with possible real estate sales in 2011 are indicating that the year will be similar to 2010 which was one of the worst years on record. The U.S. is still recovering from the bursting of the real estate bubble, and the process appears to have a long way to go before the situation is anywhere near normal.
But there is a change on the horizon, and that could potentially affect real estate sales. Whether this change would make things better or worse is still uncertain and probably depends on several unknowns, but changes could be coming about mid-year.
More specifically, it is possible that mortgage interest rates could start increasing at about that time. They have been rising rather slowly in recent months anyway, but the end of the Federal Reserve’s QE2 program, currently scheduled to end in June, could set the stage for interest rates to go up farther. QE2 stands for the second round of quantitative easing, which is the Fed’s attempt to keep rates down in order to spur business activity and the overall economy.
But if long term rates have been rising despite the efforts of the Fed, what will happen when those efforts stop? Of course the program could be extended further, but many people have expressed concerns about doing that because of inflation fears.
Certainly higher interest rates will have some sort of an effect on housing sales. At first thought one would guess that they would depress the market even more than it currently is. But could one make the opposite case, that it could encourage sales to go up? At the present time there are probably many potential home buyers who are sitting on the fence and waiting for the best deal. They see average home selling prices dropping, and they know that foreclosures are predicted to be even higher in 2011 than they were in 2010.
If people who are waiting for the best deal on a home purchase were to see that interest rates were rising significantly and doing so rapidly, they might be motivated to come into the market sooner rather than later, because higher mortgage rates could have a significant impact on the monthly payments they will be making. Such a jolt in sales might even slow down the drop in home prices that is going on, and this would encourage even more buyers to jump in. So it is possible that the coming increase in interest rates will have a positive effect on real estate sales after mid 2011.
Go to Colorado Springs Real Estate Agent, to check out the Colorado real estate market. Also read about 7 Home Mortgage Tips.
