How Interest Rates Are Affecting the Housing Industry

Whenever a person needs to borrow money, an interest rate is always attributed to the transaction. Most homebuyers don’t have all the cash upfront to purchase a home, so they take out a mortgage loan with a corresponding interest rate. With that being said, whether the rate is high or low will influence the buying and selling habits in the housing industry. Take a close look at how these percentages impact the housing market and your ability to get into that dream home.

1. Encouraging New Purchases

When interest rates are low, homebuyers can afford a higher-priced property and most of their monthly payment goes to the principal instead of the high-rate interest. This fact also extends to budget-minded individuals. With high rates, monthly payments may be higher than their ideal budget, and may decide to remain renters for the foreseeable future. Low-interest rates allow these buyers to get their foot in the proverbial door, which creates a beneficial housing industry for both new and existing buyers.

2. Knowing About Impending Changes

Interest rates also affect the housing industry when they aren’t even fluctuating. The Federal Reserve is in charge of increasing or decreasing the rates so that the financial world remains steady and strong. If Fed intends to raise rates in the coming months or current year, homebuyers may be more inclined to purchase a property as soon as possible. If they wait, those interest rates can be higher in just a few months. This fact also benefits sellers who want to sell their homes for a higher price.

3. Exciting Current Owners

Homeowners may have purchased their properties when interest rates were on the higher end and retained this rate over the years. They can afford the amount, but a lower rate is always attractive.

As interest rates drop, refinancing your home is a real possibility. Depending on the owner’s financial situation, he or she may be able to lower the monthly payment by several hundred dollars. Freeing up those funds gives them a chance to spend that money elsewhere, which improves the economy as a whole. The idea is that you can own the home forever but you don’t have to own the loan forever.

4. Improving Properties With HELOCs

A HELOC is a home equity line of credit that a bank can extend to a homeowner. You can use the equity in the home to improve the property or pay off other debts. These accounts, however, will usually have a variable interest rate. High rates will discourage opening or even using a HELOC. Low rates allow owners to use the equity at a reasonable rate, which improves the home with upgrades. Subsequently, the entire neighborhood can look and function better with rates that are affordable to most homeowners. It’s possible to raise a home’s value with the improvements too, ultimately increasing the home’s equity.

The housing industry is a dynamic world, which means that buyers and sellers should turn to an experienced agent or company for the best outcome. Mortgage lenders in Huntington Beach can help you make a real estate decision that’s positive for your family and legacy.