All That You Need to Know About The Effects of Mortgage Rate
Getting to know the real estate market seems a daunting task. It becomes even more difficult when it comes to buying or selling a house. But a little knowledge about the effect of mortgage rates on the real estate market can help you to make a wise decision. Here is all that you need to know about mortgage rates.
The mortgage rate is an essential factor determining the growth of real estate in the US. The rate depends on multiple factors like growth of the economy, savings rate and the actions of the US Federal Reserve. The higher the rates lesser will be the demand for borrowing and thus low home demand and vice versa.
Effect on purchase agreements
Increased refinancing - Low mortgage rates increase affordability thus increasing the demand for houses. With this comes the option of refinancing that is, exchanging the current mortgage for a low-interest one.
Increase in home availability - During the low mortgage rate situation, demand for homes increases. Besides, construction companies can avail loans at a low rate, increasing the construction of houses.
Effect on sale
Though an inverse relation exists between mortgage rate and demand for home, the selling prices do not depict the same. When mortgage rate lowers, demand increases thus increasing the prices. When prices reach new heights, the demand can decrease resulting in a crash of the prices.
Real estate projections for 2020.
According to Federal Home Loan Mortgage Corporation also known as Freddie Mac, the current mortgage rate is 3.67%. This decrease in rate resulted in a lot of refinancing thus increasing the demand for houses. Concerning the home prices, it will rise by almost 5.6%, according to property data firm CoreLogic. Due to a lack of new listings, there will be price pressure on the available number of properties. DeFranco, chief economist for mortgage insurer Arch MI says that low-interest rate and a dearth of starter homes will continue to increase the prices. Redfin report confirms the average homeownership for at least 13 years and a maximum of 23 years. Hence, experts project that the inventory of homes will remain tight in 2020.
According to ATTOM Data Solutions, a noted property data provider conducted research analyzing 23 million home sales and concluded large average discounts on home prices at the end of this month. So go get a deal and turn your dream of owning a perfect house into reality.