What the Canadian and LIBOR interest rate increases mean
I’m no economist but seeing that the LIBOR rate has been rising and now the Canadians are raising their rate as well shows That things are changing. it could be that things are looking up in Canada but the rise in LIBOR rate does come at a cost to anyone holding an Adjustable Rate mortgage. Not to mention anyone who indexes their mortgage rates to the LIBOR for new mortgages.
This could add to downward market pressures that the US real estate market already has due to the expired $8,000 federal subsidy for first time buyers to buy a house. This real estate mogul would suggest that prices in areas with stagnant job growth (almost anywhere) and excessive inventory (both real and shadow) you might see some hard bargains being driven where sellers are being asked to come up with $8000 (It’s only Fair right?). More than likely the general population of potential sellers will be in wait and see mode in areas where jobs are not actively being lost and where unemployment is not running out yet. Things could still get ugly in other areas where the jobs are going away and unemployment is running out and where the 5 Year Arms from 2006 sales have yet to adjust).
That’s the problem with giving advice on real estate online. it’s a local business. Find a Broker who you has been in the business for more than 15 years and you will have someone who can guide you to avoid major mistakes. Unfortunately I can say for sure in your market that the bottom has passed but it’s likely if the commercial vacancy rates are down and builders have resumed building. look around. it’s not just the price of comparables because their might not be any in over a year and these will be unreliable.
Foreclosures are not necessarily a bargain either due to vandalism that outgoing owners might have done out of spite. Tread carefully on these and never pay more than 33% of potential Market value if bought sight unseen, remember that if you are diligent yourself or have the right people seeking out deals you should have 3 or 4 out of a hundred properties reviewed to bid on. Just move on and keep up the search. (action)
If you are holding an ARM mortgage and are in a position to refinance it makes sense to do so now as most ARMs utilize the LIBOR rate to index the interest rate charged on those mortgages and will likely head higher.
So while the US Fed is holding rates low for now the rest of the world is not and in the case of Adjustable Rate mortgages this is not a good thing since the Foreign rates are the ones used to set the rates.
It’s time to be careful but if you are deliberate in your investing you will be able to make good returns and have great year, just don’t be buying to hold unless you buy at well under 65% of market value or 33% for foreclosures. Get looking for those deals.