Interest Rate News Lags; Interest Rates Change Constantly
I listened to a news report last night in which the reporter explained that interest rates recently ROSE almost 1/2 percent. It was both clueless and comical because rates FELL almost 1/2 percent this week.
This is a reminder of (1) just how clueless news reports and reporters themselves often are; (2) the fact that news reports about interest rates often lag the actual market by about a week because they rely on dated rate surveys; and (3) how fast interest rates can and do change (we have an investor that changed its rates FIVE times on Wednesday alone).
When Rent vs. Buy Analyses Are Nonsense
Twitter is on fire right now with all kinds of rent vs. buy analyses telling people not to buy real estate because it is so much cheaper to rent.
But, what most of those analyses fail to account for are these factors:
- NOBODY will keep today’s interest rate, given the extreme likelihood that everyone will refinance into a much lower rate at some point over the next 6 to 12 months.
- Appreciation is almost always underestimated in light of today’s massive inventory shortage in the face of a record rise in the number of new household formations.AND
This is the biggie, making all rent vs. buy analyses suspect. Housing payments are fixed while rents usually increase every year – particularly in inflationary environments.
I saw the below tweet recently which pretty much says it all. This is a great tweet to share with any renters who are reluctant to buy.
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