I have to brag a little. I’m on fire with my rate predictions! Every 6 months I have a rate prediction for the next 6 months. 6 months ago Freddie Mac’s survey showed 30 year rates at 4.12% paying .6 points. I said rates would fall. What are they today? Freddie Mac’s survey says 3.92% paying 0.5 points. I also correctly predicted the previous 6 months (Dec 2013 -June 2014) when rates stayed flat. So, now it’s time for the next 6 month prediction. I predict rates will rise slightly.
What is my reason?
I’ll keep it simple. The government is finally waking up a bit when it comes to the housing market. I believe a strong housing market is one of the most important elements in having a thriving economy (in general, the better the economy the higher the rates). There’s been a few real problems with the housing market over the last 2 years. First, the regulations have become way too tight. There was an over correction to the mortgage collapse and the government is finally starting to see that and the process of loosening up has begun. Second, the government basically took the first time home buyers out of the equation. Other than Rural Development loans, there really are no good options for first time homebuyers. FHA has become ridiculously expensive and conventional requires 5% down. That’s a ton of money to come up with if you are buying your first home. But this week Mel Watt is announcing that Fannie and Freddie are reducing their down payment requirements to 3%. That’s a start. I predict the regulations will continue to loosen and the government will continue to come up with ways to help the first time home buyers get the housing market going.
The housing market will continue to improve with more first time homebuyers getting in the market. This will help improve the economy therefore driving rates up a bit. I don’t see a dramatic improvement in housing right away but I do see the government waking up and by the spring, I believe you will really see the housing market starting to thrive.