Guest Post by Jim Krantz, Tradition Mortgage
The past seven years have been an economic anomaly. We had the greatest run-up of housing prices in history from 2001 to 2008, followed by a massive home price crash that took the economy with it. The Federal Reserve pumped trillions of dollars into the system starting in late 2008. That kept rates low for a long time.
World Events Could Shape 2015 Rates
Historically, nothing has been safer than US bonds. While returns are low, at least the investment is safe. When U.S. investors pulled out, international investors jumped in. If the world looks safer in 2015, money could bow out of US bonds and into international ventures that would yield higher returns.
What Happens if Safe-Haven Buying Diminshes?
The average 30-year xed interest rate over this time period is 8.48% (more than double the level of current rates). If we employ the theory that the past reveals possibilities about the future, we would say it is not a matter of IF but WHEN rates will rise. And the rise could be substantial. Rates have a lot of potential to go up, but not very much room to drop. History is on the side of rising rates, especially compared to 2014 levels near 4%. Rates in the 5-6% are a real possibility in 2015 and are more in line with historical standards than rates at 7-8%.
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