Although we have been experiencing one of the longest and longest periods of low interest rates and therefore what is often referred to as cheap money, few people seem to fully appreciate what this means for real estate. market, and why! Very recently the Federal Reserve cut interest rates an additional 0.25%, so how could that affect the broader market and the essentials of the housing markets? With that in mind, this article will briefly attempt to explore, consider, examine, review, and discuss 5 possible ways this economic reality is likely to affect many aspects of this reality.
1. Mortgage rates, availability, etc: When general rates fall, there is almost always an immediate, or almost immediate, impact on mortgages. This translates to lower monthly transportation charges, monthly! When it costs less, it means buyers can get more homes for their money. It means that it is possible to continue buying a more expensive house and making the same payments. This often results in rising home costs, because when more people can afford to buy, the economic concept of Supply and Demand kicks in.
two. More house for your payments: Many perceive that this allows them to pay more and therefore they do so. They often don’t consider this may, in the long run, when/if interest rates go up. the value of the property in particular could be negatively affected! Consideration should also be given to whether we are experiencing a buyer’s, seller’s, or neutral market!
3. Qualified Potential Buyers: Because a major component of the financial qualification formula, used to secure a home loan, when rates go down, and therefore monthly payments, too, there are many more qualified potential buyers around. This means that the owners/sellers begin to be in a more favorable position, since it increases the buyers and, therefore, tends to a vendor’s market!
Four. Some owners may list the house earlier: When prices rise and demand increases, this is often accompanied by more homeowners deciding, it may be a good time, to put their house up for sale! In the short term, there may be an impact, which may or may not be the same as in the long term.
5. More refinancing, more general use of credit, etc.: Many homeowners decide it’s time to refinance their home loan because of the lower rates and therefore cheaper money! It may also result in fewer cash transactions, because it makes more economic sense to borrow funds instead!
When rates fall, in most cases, prices rise, and so does demand! An intelligent consumer, whether buyer or seller, knows the conditions and acts accordingly!
