The Million Dollar Question About Interest Rates

Interest rates are overdue for a correction.

All eyes will be on the Federal Reserve today and whether short-term interest rates will finally get the boost we’ve all been expecting for years. The government has been tip-toeing around this issue for so long nobody can really predict when it will happen except that it’s got to happen eventually. Interest rates have been suppressed for way too long. I imagine you probably are a little shocked that a Sacramento Realtor would admit this, but it’s true. Mortgage rates have gotta go up.

Initially, yes, it will be put pressure on the entry-level market, but we need a healthy economy. People forget that we have not quite recovered in Sacramento. We still have homes underwater, we still have tons of those loan modifications that are adjusting right now, and many homeowners struggling to make those higher payments may end up doing the short sale they probably should have done years ago.

Some people who bought during 2007 to 2011 and now selling are making a profit, but those from 2004 to 2007 are still hurting.

Part of the opposition to rising interest rates probably stems from a long comfort level. Once you get used to something, it’s hard to remember the way it used to be. Like having to find a public pay phone when you’re out and need to make a call rather than reaching into your pocket to pull out a cell.

I recall in 1995 when my husband and I took out a loan on our previous home and were so thrilled, absolutely tickled pink to obtain a rate of 8%. Far cry from the double digits. I don’t know about you, but less than 1% return on a money market account or a CD is horrible. You may as well pack your mattress with cash, should you have any, that is.

It’s anybody’s guess where the Fed will move short-term rates today. But experts say the prediction is up, and it seems to be more likely now than previously. We are headed toward an economic recovery, and it sure would be nice to get there. On top of this, remember, historically, people still buy homes in Sacramento in spite of higher interest rates.