She was explaining where we are right now with Real Estate in terms of a "Real Mortgage Rate". She defines this a the Mortgage Loan Rate minus the Expected Growth of Home Values. At the peak of the market this was about a 6% loan rate, minus a 17% growth rate for a resulting effective Real Mortgage Rate of -11%. (No wonder people were speculating on homes! Perhaps the Fed should have raised rates back then!) During the decline in prices we had 5% rates with a negative 20% growth rate, so this made the effective Real Mortgage Rate very high at +15%. Now where are we? Current Mortgage Loan Rates are around 4% and the expected price growth is (in line with inflation) at about 1%. So the Real Mortgage Rate is about 3% ( 4% - 1%) so buying real estate now appears very attractive!
She also noted that, personally, she and her husband have bought their retirement home in Florida even though they have many years to work. They are real believers in the opportunity that is being presented right now.
-JOHN
If you would like John or Rosemarie Boyd to speak to your group or organization on financial planning or investment strategies contact Rosemarie at rboyd@boydstrategy.com or call her at 508-754-3226. The comments on this blog do not represent individual Investment, Tax or Legal Advice, and do not represent an offer to buy or sell any security. Consult the appropriate professional before acting on any idea seen here.
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