Des Moines Real Estate Blog

Your Economist of Choice, Your Realtor of Choice

  • Adam Van Lin, Realtor
    Burnett Realty
    10200 Hickman Rd. #100
    Clive, Iowa 50325
    Cell 515.344.1068
    Fax 515.331.3401
    Licensed in Iowa

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The Future of Interest Rates

Posted by adamvanlin on August 15, 2011

An interest rate below 5% is rare and supportive of the housing market.  Interest rates are actually one of the ONLY few things that are supportive of the housing market right now.  Many people expected interest rates to rise as the debt ceiling debate weighed on, but they have not significantly rose.  Last month rates rose to 4.55% from 4.51% the month before.  Although I’ve heard clients say they are locking in their rate and making their purchase before rates go up, I don’t see that happening anytime in the near future.  3 reasons.  First, U.S. bonds are still one of the safest investments in the world.  Even though the U.S. credit rating was downgraded, that initiated a flight to safety, and money poured into U.S. bonds driving the yield lower.  Second, the outlook for the next 10 years does not look great.  Debt ceiling debates, rising taxes, more stimulus money going to waste, and Europe are just a couple of things dragging on the U.S. outlook.  (I bet we could get a list of like 25 things if we really tried!)  Third, deflation of prices still trumps inflation at this point.  There is still too much pressure on businesses and margins because of the lack of employment.  Until Americans regain their spending power, the threat of inflation remains in the distant future.

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