Comfy Austin

It's a chilly day in Austin, TX with freezing sleet and cars turned over in ditches due to icy roads, but one thing that is on fire is mortgage rates for Austin real estate.  Anybody who happens to be in the market for houses in Austin may have noticed that mortgage rates worsened everyday over the past week.  Conventional rates are now about five percent, which is certainly not bad, but that is still a huge increase from just about three months ago.

For anybody who is thinking about buying an Austin house may wonder just what happened.  Well, apparently, about 11 weeks ago, mortgage rates were riding an 8-month hot streak, and appeared headed into the 3s. Then the Federal Reserve did its thing.  On Nov. 3rd, it announced a second round of bond buys, a $600 billion program called Quantitative Easing, Round II.  I can't explain the purpose of that move as it's beyond my area of interest, but I can say that Wall Street investors got spooked about runaway inflation.

Inflation would mean that the U.S. dollar would lose its value.  Since U.S. mortgage payments are paid in U.S. dollars, inflation would make the mortgage bond repayments lose their value. What does this have to do with home loans, you might ask?  Well, whenever bond prices fall on Wall Street, mortgage interest rates rise on Main Street here in ATX.   And so because Wall Street investors feared this happening, buying a home in Austin is going to come with a more expensive loan.

Let's just take a quick example.  Supposing you were interested in buying a listing I have in Round Rock Texas at 1601 Belvedere.  The list price is $217,000 for this great one story. If you were to finance that house in the Sonoma subdivision today with five percent down, the P.I. portion of your payment would be about $1102.  Last fall, that same portion of your payment would have been closer to $980.  Because of rising rates, home buyers lost roughly 10% of their purchasing power.  If you were thinking about buying in Round Rock or the greater Austin area, the time to get under contract may be now.