Orange County Real Estate Mortgage Rates – History and Where They May Be Heading
Mortgage rate moves over the past few weeks has provided plenty of fodder for headlines and attempts to read the Orange County Real Estate crystal ball to predict future home sales trends. While some of the recent upward moves were significant in light of their percentage of increase over existing rates historically they really were more like minor crests in our long-term wave of historically low rates.
The graph below represents the average 30 year fixed mortgage rate for California from June of 1986 to October of 2013 and shows today’s rates remain at historically low levels. You can see that even during the boom the average 30 year fixed rate was over 6 percent and we didn’t start reaching our current levels until the economic collapse of 2008 which sent rates steadily towards until today.
Rates started to rise recently for the same reason they fell, the Federal Reserve Board reacted to the current economic realities by increasing the money supply to lower rates and tightening the money supply to raise rates. The largest recent rate rise in fact followed and was directly linked to a positive jobs report. As the economy improves historical trends show more money is spend driving up the demand for money and driving up mortgage interest rates. However a couple recent worse than expected economic reports caused rate to fall again, and the Fed announced they would not taper their monetary easing policies yet.
For Orange County Real Estate buyers the rate rollercoaster of the past few weeks may have been a bit unnerving especially if they were seeing their payments swing $100 or more a month in one direction or the other from the time they decided to buy to the time they were ready to close escrow. Since these rate swings are really tied to government policies, and let’s be honest our government is not exactly functioning like a well oiled machine right now, buyers need to be prepared for more rollercoaster rides for the time being. Keeping it in historic perspective current rates make it a great time to buy Orange County Real Estate!
Where are rates headed? Ok so we have the Fed promising not to tapper their easing policies of the last few years so rates should stay low right? Well no, rates will rise when the economy gets better, truly better, growth kicks up significantly, borrowing across all fronts increases and demand for money rises. Then the Fed will be able to tapper their policies and 30 year fixed rates should get above 6% again (sign of a strong economy), because regardless of what the Fed says they have to react according to economic conditions and at some point these rates have to rise.
So if you are thinking about buying Orange County real estate you still have time to take advantage of what historically are obscenely low rates before they start to climb. If you are a seller of Orange County real estate keep an eye out for rate trends, you may get less action on your listing when rates bounce up and need to be ready to capitalize when rates move down.