People often ask if now is a good time to buy a home, but nobody ever asks when a good time to rent is. Regardless, we want to make certain that everyone understands that today is NOT a good time to
Seattle Mortgage Interest Rates And Normalcy Bias
If you look up the term “normalcy bias,” you find yourself swimming in psychological theoretician talk, most of which deals with people’s response to disastrous situations. The theory behind it is that when faced with the unknown, there is a tendency among even rational human beings to misconstrue new (and even dangerous) circumstances as being more normal—hence, safe—than is really the case.
What this has to do with Seattle real estate is not as farfetched as you might think. Ask anyone who wanted to buy a house in the early 1980s, and you will probably get an earful. Because of inflation since then, the asking prices for local homes back then seems pretty inviting today…until we check into the then-current mortgage interest rates. A home that today is valued at $250,000 would have had an asking price in 1983 dollars of just over $94,000—a real bargain. But the October 1981 30-year mortgage interest rate was a colossal 18.39%! In today’s dollars, the monthly payment on a mortgage for the full amount would be a daunting $4,295! That’s not even counting taxes and insurance.
No one is predicting that 18% mortgage interest rates are right around the corner—or even any time in the future—but no rational observer is predicting that they will remain at today’s historic lows, either. Not for nothing is “normalcy bias” also known as “analysis paralysis.” There’s more than idle speculation behind the suspicion that change is in the air.
A case in point came last week when Seattle mortgage interest rate watchers got a peek into the rate-setters’ minds. The November 2 release of the Federal Reserve’s notes from their last Open Market Committee meeting wasn’t entertaining reading, but did shed some light on what lies ahead:
Committee members agree that their goal remains 2% inflation (it’s less than that now) coupled with “maximum employment and price stability.”
They believe the case for a rate hike has strengthened but is not yet sufficient to raise rates.
The Committee expects economic conditions will evolve to warrant gradual increases in the Fed funds rate.
Two members voted to raise the target rate ½ to ¾% without waiting further.
All in all, if future Seattle home buyers have a normalcy bias which leads them to expect today’s rates will be around indefinitely, it’s safe to say they are more likely to be disappointed than not. That makes right now an excellent time to take advantage of all the bargains currently populating the Seattle market—which means also giving us a call!
As a dedicated real estate broker I have helped over 500 families purchase or sell their home and I am qualified to guide you through buying or selling a home. Buying or selling a home is one of t....
Latest Blog Posts
Whether you are buying or selling a home it can be quite an adventurous journey, which is why you need an experienced real estate professional to guide you on the path to your ultimate.
Some Highlights: In a recent Harris Poll, Americans listed "change in climate/weather" as their top reason for wanting to relocate. 41% would move for a “better job