Everything Real Estate

Monday, May 30, 2005

interest rates and real estate - should I invest?

I'm a real estate investor. Many of my skeptical friends have mentioned that real estate prices will pop like a bubble when interest rate rise. To me, whether interest rates pop the real estate bubbles out there isn't the key question. The key question is whether interest rates will indeed rise - to levels of years past to 8+ % or even to the outlandish 15+ % from the Carter years, and be at such high levels that they force the popping of the real estate bubble.

One camp says "no" --- interest rates will stay low for the foreseeable future. Why? The "Rubonomics" of the Clinton era - an era that saw low interest rates fuel the vibrant economy - proved that low interest rates are an indispensibable tool for the buoyant economy. The government would be foolish to prevent liquidity in the market by raising interest rates to such high rates ever again.

Another camp says "rubbish." The lack of fiscal discipline from the George W Bush years with decreasing taxes proves that the government maybe willing to use interest rates, instead of taxes, as a way of tame inflation when necessary.

What do I think? I think that the feds (Greenspan et al.) have left the impression that interest rates should be kept historically low for a vibrant economy, and therefore, they will be kept historically low for the next generation (~ 20 years).

What does this mean for you? Well - for one, interest rates will not pop that real estate bubble. And two - if you're thinking about buying real estate (whether as a primary or investment grade property) - its a great investment.

To learn more about mortgages, interest rates and real estate, go to sites like these:http://www.ussavingsnetwork.com/ . Good luck with your real estate mortgages and purchases. - MrJ.

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