Last Updated:
June 21, 2010
Deleware Real Estate
"NOBODY CAN GO BACK AND START A NEW BEGINNING...BUT ANYONE CAN START TODAY AND MAKE A NEW ENDING."
Those words by the poet Maria Robinson should hold a special meaning - and warning - for anyone thinking about buying a home or refinancing, especially in light of the article by Former Fed Chairman Alan Greenspan which hit the wires last week.
In his Wall Street Journal op-ed piece, Mr. Greenspan stated: "Don't be fooled by today's low rates. The government could very quickly discover the limits of its borrowing capacity." He also added that the present low inflation and low long-term rate environment has fostered a "sense of complacency (within the government) that can have dire consequences."
What Mr. Greenspan is saying is that the government, rather than cutting budget deficits and showing fiscal restraint is taking advantage of this low rate and low inflation environment to accumulate more debt - and the consequences can be very bad...just look at Greece.
Mr. Greenspan also said Treasury yields could spike, and in a hurry...
Greenspan said, "Long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points."
Mr. Greenspan's sobering comments should not be taken lightly. The fact is, there are no fundamental reasons why rates - including home loan rates - should be as low as they presently are. The confluence of factors all coming together at the same time have made for an incredible low rate opportunity, but it won't last long and can change very quickly.
And, like Maria Robinson's words of wisdom, once rates begin to change, there's no way to go back to take advantage of them. The time for that is today!
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