As you’ve probably heard, interest rates are the lowest they’ve been in over a year and a half. This means more buyers are coming off the sidelines and starting their homebuying search. More buyers mean more homebuyer demand, bringing more sellers into the market looking to sell their homes for top dollar.
Interest rates are a huge economic factor that affects the market's direction and where it’s going. Low interest rates can help increase your purchasing power and ability to navigate the market. Let’s dive into the importance of low interest rates below!
Increased Borrowing
When interest rates decrease, the cost of borrowing money decreases, directly affecting how much buyers can afford. Even the slightest decrease in interest rates can increase your purchasing power and make it possible to afford a home worth more than you could afford when rates were higher. Simply put, you can get a bigger or more expensive house for the same monthly payment.
Increased Affordability
When interest rates are high or on the rise, many buyers get kicked out of the homebuying search because they can’t afford it, leading many to continue renting instead of purchasing a home and starting to build home equity and generational wealth. Low interest rates can equate to lower monthly payments, making affordability more accessible to more buyers.
Increased Inventory
Low interest rates can bring more sellers into the equation, as buyer demand is high and more buyers are looking for homes. More sellers mean more home inventory is available, and there are more options for buyers to choose from. While this might seem like a disadvantage for buyers due to increased competition, if you have a solid pre-approval letter and work with an experienced agent who writes you a competitive offer, you can set yourself up as a serious buyer and stand out from the pack.
Low interest rates are typically a sign of a buyer’s market, but home prices will need to decrease a little for that to happen fully. If you have questions about interest rates or if now is the right time to buy a home, reach out to us today! We’re always here to help.
Posted by Shane White on
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