Buy Now! Not just because interest rates are increasing

The Federal Reserve announced on December 18, 2013 they plan to decrease stimulus spending starting January 2014 by $10 million a month. This typically translates to increasing mortgage interest rates. Thus far, the 30 year fixed and 7 year adjustable rate mortgages for jumbo loans have held steady at 4.125% and 3.125%, respectively. However, expect to see rates rise in the coming months as decreased federal spending continues and the economy starts to respond.

With that said, interest rate increases are not the only reason to buy now. Local economic factors play a role. Demand is extremely high and supply is low in the Silicon Valley. To date home prices have jumped at a remarkable rate and are projected to continue to rise throughout 2014. In 2013 the average sales price in Palo Alto increased 12.08%, while Menlo Park was up 17%, Los Altos 9.33%, and Mountain View 19.28% compared to 2012. With appreciation rates at this level, any concern about rising interest rates should be secondary. Most homes are sold within days of going on the market – with multiple offers and at rates over the original list price. A great example of this is the DeLeon Realty listing at 1521 Escobita Avenue in Palo Alto – it was listed in mid-October 2013 for $2,498,000. The home was sold in 8 days, with multiple offers, at $2,875,000. The next comparable home that comes on the market in that neighborhood will most likely be priced at $2,875,000, or higher. If you project prices through 2014 you will not just be paying a higher interest rate, but also a higher price, so buy now!