May 11

Real Estate Snapshot for Louisville Kentucky

The Louisville real estate market has been doing much better than many parts of the country but there are still negative figures showing up in the reports.  Most notably is the number of sales, 2,892 as of 5/10/2011 verses 3,435 for the same period last year or 543 fewer homes sold so far this year. 

Most of the price bands below $400,000 show a decline in the number of units sold while the bands above that level showed a dramatic increase.  The percentage increase is skewed because the numbers are so small.  If there was one sale in a band last year and two this year that is a 100% increase but still not hot.  I suspect the increase in sales for the expensive homes is not necessarily a good sign, it could very well be an indication they sold for less overall.  

There is twice the number of monthly inventory today than the same time last year, also a sign of softening.  New listings so far this year are 8,455 with reported sales of only 2,892. 

The interest rates have declined even further this year hitting all time lows, a very big signal it is time to buy.  I have been watching interest rates all my adult life and there is not much left on the downside.  Anyone that is waiting for them to go lower is betting on the wrong side.  There are many more rates available above the current level than there are below it.  There are also some expenses built in to the rates system that no one seems to be pointing out. By that I mean there is an absolute bottom to how low they can go but there is no ceiling for how high they can go.  

Servicing, investor yield, and cost of delivery are just a few examples of expenses imbedded in the interest rate.  The yields to investors are where most if not all of the reduction has been taking place.  At some point (are we there yet?) investors are going to stop buying 30 year bonds at such ridiculously low yields.  Would you buy a 30 year cd at 4% if cashing it in cost 25% of the principal?  I wouldn’t.  

I propose that artificial pressures are holding down mortgage rates.  That is the only answer that makes sense to me.  I filled up my car yesterday, gas prices are not being held down.  My banana index tells me we are in a world of hurt, the value of the dollar slipped again this week against the price of bananas, 11.54%!!!   

5 13 116 300x125 Real Estate Snapshot for Louisville Kentucky

Okay, here is the scoop, when this thing we are living through changes directions it will blast like a rocket.  When the demand for money exceeds the ability to push rates down we can see dramatic jumps in the cost of borrowing money.  Tiny moves in interest rates become a very big pile of money when stretched over 30 years.  A large jump would pay for an entire boat load of bananas! 

It’s time to move!

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