In 2019 Choose to be Real Estate Savvy

If you're on the fence about purchasing a home this year, consider this, Lawrence Yun, a paid National Association of Realtor (NAR) Economist, says "Housing remains our nation’s best and safest wealth builder over the long term.". [link]

If that's not enough to get you over the fence, interest rates are currently around 4.8%. 9 years ago, interest rates in 2010 were 5%. That tells us that the interest rates are increasing. The Federal Reserve is increasing rates steadily so the economy can adjust accordingly and the mortgage market while not directly effected by the rate hikes set but the Feds, generally increases as well.

So, I've broken down the mortgage payment difference if you buy now or if you wait to jump the fence later in the year. My savvy senses say, do it now if you can.

Why do Interest Rates go up?

To understand why interest rates go up, you must first understand who gets the interest payment. One example is that people-like you or me-can take their private money/savings and invest in mortgage-backed securities. Zacks gives a perfect breakdown of how this works,

"Instead of directly investing in the note, you can also buy a mortgage-backed security. Mortgage-backed securities are like bonds, but instead of being backed by a company or a government, they're backed by the income that comes from pools of homeowners paying their mortgages. Some of the best-regarded mortgage-backed securities come from government-sponsored entities like Fannie Mae, Freddie Mac or government-owned Ginnie Mae. The simplest types of MBS, pass-throughs, simply collect mortgage payments and send each investor her share. They're easy to buy, easy to sell and may offer good returns. However, there is the risk that you could get your money back sooner than you expect if homeowners pre-pay their loan. MBS are openly traded, so you can buy them through an investment broker, just like you would with any other bond or fixed-income investment." [link]

As an investor, you make more money when people purchase a mortgage with a higher interest rate. For an example, a mortgage today of $140,000 with an interest rate of 4.8% would pay out $124,431 by the year 2048. Granted, you would have to wait the year 2048 to collect that full amount.

Now let's take that same amount but do a rate of 5.5% and the investor would collect $146,166 by the year 2048. Investors want interest rates to go up. So be savvy and buy now while rates are low and you can acquire a couple of years of equity.

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