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Getting the Runaround on the Direction of Interest Rates

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Does the following scenario sound familiar?

You’re looking to buy a house.  You ask your real estate agent for some professional opinion about the direction of mortgage interest rates.  So, she or he answers:  “Well, interest rates are at historical lows, so it must be going up soon. You should buy now.”

If you had posed that question anytime in the last 6-7 years, chance are good that was what you heard.  In reality, mortgage interest rates have relentlessly dropped from the peak years of the housing bubble to reach new historical lows.  So, cheap stock answers like that drove me absolutely nuts whenever I was buying a house.

So, what does this mean?

The obvious implication is to do your own homework.  But, what you can also try is to ask your real estate agent for a thorough explanation behind that statement.  Maybe she or he has a better rationale than the “if it goes up, it must come down” argument.  Plus, the idea that you should buy simply because mortgage interest rates are going up is patently flawed, as discussed in a prior blog.

Some of the less fuzzy agents will couch their response as “mortgage interest rates could go up, so you should buy now.”  But, responses like that just get you no where since anything “could” happen.

Today, we are living in a more volatile economic environment than 6-7 years ago.  While opportunities to generate wealth abounds,

it’s never been more important to understand what’s more likely to happen in the next 2-5 years.  If your real estate broker or professional isn’t able to provide any useful guidance or explanation, keep looking.

Michael Cheng