Mortgage rates are again dropping as world economic news has Wall Street selling off in virtually every category. (If you check your 401k or IRA balances, you might notice those balances are about the same as what you would have seen in 2013!) In fact, the DOW has now dropped to lows not seen since May 2014. Prior to this latest sell off, the DOW had topped 18000 and with strong jobs reports and economic news, and appeared to be headed for 19000 perhaps by year end.
Forget Greece. It’s all about the Chinese economy, or so many news outlets would have you believe. But there’s even more going on that is only starting to make the business headlines. Bloomberg news reported this week that Brazil’s stock market is nearing a bear market. Many economists believe that Brazil is headed towards a severe recession, perhaps the worst since 1930s.
And just this morning on CNBC, analysts were saying this sell off is a delayed reaction to the FOMC possibly raising interest rates next month. It appears that what is going on with Wall Street is what we have seen before – panic selling and scheduled sell offs of huge volumes of investments by Mutual Funds, Hedge funds and individual investors alike.
Mortgage Rates drop too
While our tumbling stock market is bad news for investors and savers, it should be music to the ears for home buyers as mortgage rates plunge below 4% for best qualified home buyers.(you might want to read: Do you qualify for best mortgage rates?)
In other better news for home buyers, Janet Yellen (FOMC Chairman) is now hedging on her very strong (almost commitment) to begin raising U.S. interest rates in September. Economic instability in 2 of the worlds’ leading economies outside the U.S. along with the Wall Street sell off will very likely will impact U.S. businesses, so the FOMC is watching China, Brazil, Greece and the rest of the world to try to determine ahead of September 15th, just how much impact all this news will have on our own economy to determine if next month IS a good time to start increasing interest rates. IF FOMC acts , mortgage rates are very likely to follow.
Where are Portland home values headed?
Just a few weeks ago, Wall Street sentiment was that home values will continue to rise for at least the rest of this year, and well into 2016. And, did you know that Oregon ranks #5 in the nation for most increased values since the recession? Did you know that just last month, Portland experienced the single busiest July in RMLS history for home sales?
Update 8/21/15 1:16pm
Wall Street just closed with the DOW down more than 500 points! After a 350 point drop yesterday, and drops everyday this week, Walls street has plunged more than 10% this week alone, S & P approximately 19%, and NASDAQ down 20% this month. So what does this mean for the housing market, here in Portland and in the U.S?
Unfortunately we don’t have answers yet. We never do, until the correction on Wall Street is over and investors start buying the drops rather than selling. We could see a lot of buyers move to the sidelines with a “wait and see” posture. Still, if history is any indicator, long term investors could do worse than buying homes right now. All previous corrections in history have always produced higher values over the long term. AND, mortgage rates did drop more today making homes more affordable. Also, with some buyers moving to the sidelines, there will very likely be less competition for the few houses out there right now.
As Warren Buffet has always said; “Buy when everyone else is selling, not when they’re buying.” If the Feds go ahead and raise rates in September, buyers may not see an opportunity like this one for many more years to come.