If you were waiting for the "fiscal cliff" to be resolved before trading up to a roomier house, it may be time to jump. But if you were cooling your heels before snapping up that hot new car, we regret to inform you that it may be better to wait a little longer.
This is because nearly every interest-rate watcher agrees that short-term loans, like auto loans, will stay low and perhaps even dip a little. Being patient may lower the monthly payment on your new ride, and may even allow you to save a little more to put down.
The housing picture is a little more complicated. Economists have been predicting mortgage rates to rise slightly this year, reflecting the meager but steady growth in the job market and the economy at large.
"A lot of uncertainties that would convince people to hold Treasurys are settling down," said Mike Fratantoni, the Mortgage Brokers Association's vice president of research and economics, citing a pause in Europe's long-running debt drama, fiscal cliff deal and "frustrating, but consistently growing" job market. "Some of the fears are going away," he said.
The MBA expects the 30-year fixed-rate mortgage will break above four percent, from its current average around 3.5 percent, in the second quarter of 2013, and will rise to 4.5 percent by the end of the year.
And that prediction was made before last week's kerfuffle over the December Federal Reserve meeting minutes, which showed the deficit hawks on the Fed board losing patience with continued quantitative easing.
Even if, as most observers believe, the Fed continues to keep rates low, Fratantoni thinks the reaction to the minutes shows the market won't wait until the Fed acts before hiking rates. "Put it this way: Everyone is now sitting on the edge of their chair when a Fed official is talking," he said.
Everyone doesn't necessarily include Greg McBride, senior financial analyst for Bankrate.com, who dismissed the bump in Treasurys inspired by the Fed chatter. "It doesn't change my forecast," said McBride. "I think we'll give most or all of that back because of the uncertainty about the debt ceiling and coming spending cuts."
"With the fiscal cliff averted," McBride said, "the economic fundamentals are going to reassert themselves. We still have slow-growth economy and we're not adding jobs at a breakneck pace. It's more like a break even pace."
McBride predicts that the rate for a 30-year fixed mortgage will rise slightly through the year, but stay below 4 percent.
That makes 2013 a good time, said McBride, to put off your big house purchase and keep stashing away cash for your down payment.
Complicating the picture is the recent revival in home prices. In some warm weather markets like Las Vegas and Miami, prices have risen more than 20 percent over last year; the broader S&P/Case-Schiller Home Price Index shows the property values gaining a more modest 4.3 for the year ending in October. If your local market is heating up, it may be cheaper to make the leap to that bigger house now.
Fratantoni expects 2013 will be an active year for first-time homebuyers, who will be induced to make the switch to owning by skyrocketing rents. Those trading up, he added, will be encouraged by the idea that they can make up the losses of the last half-decade by investing in an advancing market.
But if you're not ready, it's no time to panic. The relatively small increases in mortgage rates and housing prices (depending on where you are looking) are low enough that, unlike the boom years of the early Oughts, waiting to buy will mean spending a few hundred dollars more a year, not thousands.
Meantime, the low-rate environment is conducive for prospective homebuyers to restore credit ratings damaged during the financial crisis and knock down existing debt, which will help you qualify for lower rates. It's also a good time to shop around for credit cards with lower rates. "It's a good time to trade away a double-digit interest rate for a single-digit rate, provided your credit score is above 700," McBride said.
Don't have plans to make a move? You can also take advantage of the current credit climate by capitalizing on the improving value of your home. "You are going to see lenders competing to make home equity loans," said McBride.
All you have to do is sit back and wait.