5 Ways Lower Rates Will Likely Affect Real Estate

Although we have been experiencing one of the longest and most prolonged 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 might that affect the broader market and the essentials of real estate markets? With that in mind, this article will briefly attempt to explore, consider, examine, review and discuss 5 possible ways this economic reality will likely 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, on a monthly basis! When it costs less, it means buyers can buy 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 increased home costs, 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 that this allows them to pay more, and so they do so. They often do not consider this may, in the long run, when/if interest rates rise. the value of the property in particular could be adversely affected! Consideration should also be given to whether we are experiencing a buyers, sellers or neutral market!

3. Qualified Lead Buyers: Because an important component of the financial qualification formula, which is used to guarantee a home loan, when rates and, therefore, monthly payments drop, there are many more qualified potential buyers around. This makes the owners/sellers start to be in a more favorable position, since it increases the buyers and, therefore, tends to a sellers market!

4. Some owners may list the house before: When prices rise and demand increases, this is often accompanied by more homeowners deciding, it may be a good time to put their home 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 is time, to refinance their mortgage loan, due to the lower rates and, therefore, cheaper money! It can also result in fewer cash transactions, because it makes more economic sense to borrow funds instead!

When rates drop, in most cases, prices go up, and so does demand! A smart consumer, whether he is a buyer or a seller, knows the conditions and acts accordingly!