First, thanks for reading the blog and adding a thoughtful comment. You said that you disagree that prices will rise significantly. I was speaking specifically of the time period as the tax credit runs out, homes in the first time home buyer price range will increase. In fact some have argued that the increase is proportionate to the tax credit. However, I also feel that we are at a bottom for prices on a long term basis as well. There might be a relaxing right after the tax credit but I believe that the price for the same house in August of 2011 will be more than it is in August 2010.

To say Oklahoma real estate doesn’t rise significantly is to predict the future based on the past which I believe is folly. To predict the future you have to look forward not backwards. But beyond that you will see that there were major increases in prices toward the end of the price appreciation. One of the main reasons we didn’t overheat too much was that we had our own localized crash in the 80′s that put our starting point much lower. However, we were well on our way to overheating when the steam was let out by the nationwide crash causing nationwide tightening of credit which slowed our market. My point is prices have the ability to significantly increase in Oklahoma.

You are correct in pointing out there is more crap to be dumped on the market by the banks. However, in Oklahoma there is less of it and a slight price increase makes most of our problems disappear. With even the slightest of price increases most of the people under water are no longer under water. In contrast the bubble markets will take years to make up their loss.

So, in short we agree that interest rates will increase. I believe that prices in 2011 will definitely be more than they are in 2010 in Oklahoma. You state you would refinance later when interest rates settle but you begin by arguing that you believe interest rates will increase. I seriously doubt we will see rates as low as they are now in the next 30 years which is the life of the typical loan. What I am saying is I doubt you would be able to refinance at the rates we are seeing now and if you do refinance you have to factor in the cost of refinancing.

I appreciate your comments and only time will tell if you or I are right. But we can absolutely agree on one thing. The government is spending ridiculously. Actually, it is beyond the point of ridiculous. There is no word to describe the foolishness of the course our country has chosen. Our actual course of action could be described as spend our way out of financial problems. Does this make sense to anyone? Really?

I read your blog occasionally and would like to comment on the most recent entry \You are in the sweet spot. Pull the trigger.\

I agree that interest rates will go up (I believe even higher than 6% over then next few years as the Fed stops backing the market and inflation soars to keep up with all this ridiculous spending by the government), it is a fact that FHA loans will become more expensive, but I disagree that prices will rise… especially significantly.

Why is this? Well first of all, Oklahoma real estate doesn’t rise significantly… it barely keeps up with inflation. Secondly, and most notably, with the increased cost of the FHA loan and the rising interest rates, almost the entire pool of buyers will see a decrease in purchasing power. Lastly, a fact that doesn’t affect Oklahoma as much as the \bubble markets\ is that the majority of negative amortization, option arm, etc loans will be coming due between now and 2012. So when your entire buyer base has a reduction in purchasing power, short-sales, foreclosures and the \shadow inventory\ plague the market prices will decrease, not increase.

So why is now the best time to buy? I’d rather pay less for a house and incur a higher interest rate (which can be refinanced at a later time when interest rates settle), than pay more for a house (become upside down) just to get a slightly better interest rate.

Just my $0.02

gb