Potential home buyers waiting out the holy grail of real estate trends: Rock-bottom interest rates in combination with equally low home prices may finally be taking a bite this summer. What’s enticing them? The possibility of the Fed raising interest rates – and the realization that mortgage rates aren’t going to get any better.
How low did they go?
Since the housing market crisis, mortgage interest rates have dropped to new depths in efforts to keep U.S. homes affordable. Freddie Mac reported a drop in rates for the first 11 weeks of the year, producing interest rates that are now at an all-time low and only expected to get significantly higher. 30-year conventional fixed-rate mortgages have reached 3.5%, with even lower rates in FHA and VA mortgages. In fact, today’s interest rates are so low, compared to the start of the year, that buyers are paying 16% less on their mortgage interest payments.
What about sales?
Real estate trends show sales remain at their strongest levels in eight years. Demand is strong, especially with mortgage rates reaching 3-year lows. This increased demand has prompted a scarcity of inventory, particularly for homes on the lower end of the market. Without additional inventory home prices may rise, affecting the budgets of prospective buyers.
Good advice for buyers
Watching interest rates over home purchase prices – and being patient for the right home to show itself – is advisable for today’s active buyers, as interest rates affect overall affordability in terms of monthly payments, as well as total long-run expenses. Without taking advantage of today’s low rates, buyers could end up spending considerably more on interest over the years than they would on a higher purchase price.
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