It’s funny how the press works. Someone comes up with a new story arc, suddenly you read about in every newspaper, suddenly everyone’s talking about it, then it disappears.

This week, it was, “Are buyers holding off buying because they think interest rates will drop, further?”

From the Globe:

… [E]ven though rates on home loans are approaching historic lows, many prospective borrowers are apparently holding off, on the assumption that in just a few weeks they will be able to get even better deals.

Borrowers are tempted by a proposal floated by the US Treasury to move rates to 4.5 percent for 30-year, fixed-rate mortgages.

And other efforts are afoot that could further drop rates. The Federal Reserve Bank recently initiated a mortgage-buying program to lower rates. Upping the ante, the nation’s top mortgage regulator, James Lockhart, told a business group earlier this week that the government’s ongoing efforts could result in rates dropping “well below 4 percent.”

I’m skeptical that there are a lot of people waiting for lower rates. I think what people want mostly is stability, which means three or more months of no more “bad news”. Only when there is confidence on the part of potential homebuyers will they return to the market.

If I was a buyer, would I wait to buy based on potential drops in the interest rates? I don’t think so. Rates are at “historic” lows, already. Most people would be happy with a sub-6% interest rate on their 30-year mortgage loan.

Most people buy based on what their monthly payment is going to be. Yes, it could be “cheaper”, but if a homeowner can afford $2,000 a month in mortgage loan payments, then would they really wait if the payments might (might) go down to $1,800?

What potential buyers can’t stomach is a potential 10% drop in home value, within one year.

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