A year ago the politicians and the oil companies (some argue that they are one in the same) blamed an unprecedented spike in fuel prices on temporary aberrations. A protracted war in an oil-rich region of the world and a hurricane season that created the worst natural disaster in American history and temporarily crippled domestic oil production were to blame.
Now the same pundits inform us that high fuel prices are the way of the future. And they attempt to comfort us by adding that environmentally-friendly policy changes are being enacted to alleviate our dependence on oil. But for many of us, the only green machinery on the horizon seems to be the one that devours our greenbacks every time we pull up to the self-service pump. The trickle-down effect is already being felt throughout the economy, as the world’s supply of oil reportedly dwindles to a trickle.
So if you and your partner are thinking of buying, building, or refinancing a house, you may want to fuel your decision-making with some facts related to the effect of fuel supplies on the housing market.
First the bad news:
Gas Prices Will Raise Construction Costs
Almost everything related to building projects runs on gasoline. When prices for fuel go up, it costs more to produce building materials and more to ship them. If the price of artichokes doubled this month due to shipping costs, imagine what that means for those who are shipping concrete blocks across the country.
Next time you pass one of these gigantic dual-wheel extended cab pickup trucks with the tool box mounted on the back, consider how many construction workers drive back and forth to building sites in those hardworking gas guzzlers. For such commuters to make ends meet something has got to give; and if you are building a new home, you’ll probably be the one doing most of the giving.
Interest Rates are Headed Up, not Down
Interest rates are rising, and although there is some mild conversation about them not being hiked every time the Federal Reserve gets together for coffee and donuts, nobody is projecting that interest rates are going to do a U-turn and actually fall. Don’t bank on getting easier money this time next year, and if you have an adjustable rate mortgage, you might want to think about converting it to a fixed rate.
As Rates Rise it Gets Harder to Qualify for a Loan
When interest rates and construction costs go up, new loans will not only cost more, but will be more difficult to qualify for with the same amount of monthly income. The challenge of finding a mortgage may rain on the parade of homes and put a damper on home buying plans over the next few months and years.
Now for the good news:
Interest Rates are Still a Bargain
If you have been thinking of buying or building, there is no time like the present. Interest rates are near their all-time lows, and many investors still consider today’s rates to be almost like free money. Compared to historical numbers, today’s rates represent deep bargain basement discounts.
Mortgage Companies Need the Business
Rather than looking backward at last year’s rates and lamenting that you didn’t lock them then, think to the future. If you have an adjustable rate mortgage, this may be your best chance to refinance to a fixed rate loan. If you’ve been sitting on the fence waiting for rates to move before you buy a home, this is the time to get off the bench and into the game. Lenders worry about the future just like their customers do, and right now mortgage companies are more than willing to cooperate with those who want to refinance existing mortgages or originate new ones, because business for banks is slowing.
Construction Costs are Still Reasonable
And if you have construction plans, you will be much better off breaking ground now, while the potential spike in cost per square foot is still a topic of armchair speculation. By the time gasoline hits four dollars a gallon, it will be too late to reconsider your options. Even during an average hurricane season, it is not unusual to see the price of items like plywood and sheet rock skyrocket. Now is the time to lock in not only low interest rates, but also lower building costs.
We’ve enjoyed a robust bull market in real estate, as rates scraped the bottom of the barrel. But with oil costing twice what it used to, change is inevitable. Those who take advantage may find that the winds of change help to inflate their sails. There’s still time to reap rewards from the real estate market, even as soothsayers predict a lull in the action.
If you’ve wanted to buy but have put off the decision, now may be the time to go ahead and act to fulfill those dreams. Real estate agents at www.gayrealestate.com are fully committed to the global GLBT community, and can help you realize your goals.
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