I was about 15 years old… I can remember it like it was yesterday. I was at Larry Beaman’s house after school. Larry lived on a farm and we were playing on the fence climbing over into one of the stock pens. I had managed to climb up on to the top of the fence from the back side because there were 2×6 support rails midway up the fencing… however on the other side, the fence was smooth. It was about 6 feet tall as I straddled the boards… then without thinking, I jumped. As I landed I felt a sensation unlike anything I’ve ever felt before.. almost a vibrating feeling in my foot and ankle…. That feeling didn’t last long because shortly after that as I took my first step, the vibration feeling turned to pain. I had just suffered my very first sprained ankle. All because I had jumped off of the fence at it’s highest point. Had I been more observant, I would have noticed that this fence ran along a hillside and as the fence got closer to the hill, the distance between the top of the fence and the ground was much lower. That day I learned my first lesson about jumping off a fence. If I didn’t look around first, my instinct to just jump from where I was at could end in pain.
One of the things I do on a daily basis is track where Mortgage Rates are heading. This chart below should tell you something.. Just like the fence I jumped off of, the distance between the top and the ground is getting higher….the cost of money is going up. And this translates into the rise of the cost of purchasing a home. The rate represented in this chart is for a Conventional 30 year fixed rate mortgage. This type of financing was the most popular mortgage used in Des Moines in 2010 with over 4 in 10 buyers using Conventional Financing. The highest that rate went in the past 12 months was back in April of 2010 when it hit 5%. Today, February 7th, 2011 this rate is advertised at 4.875%, a mere 1/8th of a percent away from last years high. There are some of you that will say… “Rates are not going any higher… besides, 5% is still a terrific rate!”… and I believe that person is half right… 5% is certainly a terrific rate… but I’m not so sure that we have seen rates level off yet…. I’m not brave enough to publish my "guess” but I do think we will be above 5% when the spring market hits. Do you think I’m wrong?
On December 13th of last year, I wrote a blog post about rising mortgage rates. Click Here to read that post. At that time, a 30 Year Conventional Mortgage rate was 4.625%. I said it then and I’ll say it again… “Do you still have buyers on the fence? If so it is getting taller…. and its going to hurt more when your buyer jumps off.”