Milwaukee Condo & Real Estate Scene

Bubble Talk & Rate Outlook--What You Can Expect

Kevin Kowalke, Mortgage Consultant & Co-Owner of KLM Mortgage, Inc.

Bubble talk

We will enter the fifth year of the anticipated housing bubble. Yes, for the past four years the media has beat the drum on a looming housing bubble. But all the media bubble hype has only served to hurt those buyers who were scared off from purchasing a home earlier and now see how much more those homes cost.

So is there a bubble? The simple answer is no. But some areas may cool a bit after a torrid run up, especially in the top tier of their price category.

However, a healthy jobs market and low mortgage rates will sustain a solid overall Real Estate market. Don't look for a bust in prices…just a slower rate of appreciation. I expect most of the country to see home prices appreciate by 4% to 7%.

But remember, unlike stocks, home prices do not have specialists or market makers. So many people pay or ask too much for their home. It is funny to see someone buy a home for tens of thousands over the asking price and then wonder why their home has not appreciated. Moreover, some purchase their home for say $200k and then try to sell it a year later for $300k. When no one bites, they say the market is soft. Bottom line, buy your home smart or sell your home reasonably.

Rate outlook

Rates will rise a bit due to some inflationary pressure, but not too bad. Keeping rates at good levels will be continued foreign demand and asset reallocation. Our bonds look pretty good to foreigners, who are offered lower returns in their home country. And the Dollar has been stronger and may offer some bonus returns as the greenback makes further gains against most major foreign currencies. In fact, foreign buying accounts for almost half of bond purchases in the US.

As our population ages, more assets will be reallocated from riskier stocks that provide growth to safer bonds, which provide preservation. These factors should keep fixed rates between 6% and 7%, with an average of 6.5% for the year.

Overall, it looks like 2006 will be a great year. But the busier we get, the easier it is to neglect the more important things in life…including ourselves. To help ensure a great year ahead, take the time to take care of yourself. Make YOU a priority. Hit the gym, get a massage, and have fun. What good is your fortune if you aren't able to enjoy it? I wish you the best from the whole KLM Mortgage Group family for a wonderful 2006!

posted by David Ray @ 11:32 AM