According to Ken Rosen of the University of California, Berkeley, the economy is growing and anticipates a 2.2% growth in 2010. As Chair of Berkeley’s Haas School of Business and a graduate from Harvard and Stanford, Rosen has become a recognized authority on the economy and business in general. Claiming that the “financial crisis is over,” Rosen believes that interest rates should be raised by as much as 3% in order to avoid inflation.
Rosen spoke at today’s Fisher Center annual real estate conference and “predicted inflation could quickly rise to 3 to 5 percent, forcing the Fed to play catch up and raise short-term interest rates to between 3 and 4 percent within two years.” If this is true, then the near zero interest rates of today, will soon be history. To put things into perspective, a person who buys a $350K home today, with 20% down at 5.25% will only be able to afford a $297K home if rates rise only 1.5%. That’s almost a 15% decrease in buying power! For those of you who have been looking to buy, you know how much of an impact $50K can have on what you can buy.
Rosen does anticipate several more, smaller, peaks and valleys, but an overall improvement in the housing market. If you’re looking to buy, I’d act soon so you don’t get hit by these rising interest rates. Also, my guess is that there will be another Federal tax credit to first time home buyers…hopefully. Click here to read the full article.