Although, we have been experiencing, one of the longest, prolonged period, of low – interest rates, and, thus, what’s often, referred to, as cheap money, few individuals, seem to fully appreciate, what this means to the real estate market, and why! Very recently, the Federal Reserve, lowered interest rates, an additional 0.25%, so how might that affect, the overall market – place, and the essentials of the housing markets? With that in mind, this article will attempt to, briefly, explore, consider, examine, review, and discuss, 5 possible ways, this economic reality, will probably, affect, many aspects of this reality.
1. Mortgage rates, availability, etc: When overall rates fall, there is nearly always, and an immediate, or near – immediate impact, on mortgages! This translates to, lower monthly carrying charges, on a monthly basis! When it costs less, it means, buyers are able to purchase, more home, for their dollars! It means, it’s possible to proceed, with purchasing a more expensive house, and making the same payments. Often, this results in rising costs of houses, because, when more people can afford to buy, the economic concept, of Supply and Demand, kicks – in!
2. More house for your payments: Many perceive, this permits them to pay more, and, therefore, do so. They, often, fail to consider, this may, in the longer – run, when/ if, interest rates go up. the value of the particular property, might be adversely affected! One must also, consider, whether we are experiencing, a buyers, sellers, or neutral market!
3. Qualified, potential buyers: Because a major component of the financing qualification formula, used, for securing a home loan, when rates go down, and, thus, monthly installments, do, too, there many be, significantly more, qualified, potential buyers, around. This makes homeowners/ sellers, begin to be, in a more favorable position, because, it increases buyers, and, thus, tends towards a sellers market!
4. Some homeowners might list house, sooner: When prices go up, and demand is boosted, this is often accompanied by, more homeowners, deciding, it may be, a good time, to list their house! In the short – run, there may be one impact, which may be, or not, the same as the one, in the longer – term!
5. More refinancing, more overall use of credit, etc: Many homeowners decide, it’s time, to refinance their home loan, because of the lower rates, and, thus, cheaper money! It may, also, result in, fewer cash – deals, because, it makes more economic sense, to borrow funds, instead!
When rates fall, in most cases, prices rise, and so does demand! A wise consumer, whether buyer or seller, is aware of conditions, and proceeds, accordingly!