Falling rates, and market heat

As Real Estate Agents, it is our duty and passion to keep our people informed about what is happening in the Real Estate Market, and how these different times are affecting housing inventory, home values, and interest rates.

We are excited to let you know that interest rates are still historically low at the moment!

Honestly, interest are lower than we would have ever anticipated them to be, especially in times like these. In the past week, we have seen interest rates vary from 2.75% to 3.3% (of course your interest rate does depend on your credit score and how many points you are paying at closing, among other things as well).

Which creates more buying power for people searching for homes!

Let’s look at a hypothetical scenario, to see how a monthly payment would vary for an interest rate of 2.75% compared to 4.5%

In this hypothetical scenario, we are going to analyze the payment for a home that is $400,000 – with an annual property tax amount of $5,820 and a 20% down payment.

When the interest rate is 4.5% – the monthly payment (principal, interest, homeowner’s insurance, and property taxes) would be $2,223/month for a 30-year fixed rate mortgage.

Now, with an interest rate of 2.75% the monthly payment (including the same items as the payment breakdown above) would be $1,908/month.

That is a savings of: $315/month!!!
Which is also $3,780/year!!!
And over the course of 5 years that would be a savings of $18,900!!!

That is an amazing savings, think of what you could do with an extra $3,780/year

At the end of the day, the right time to buy is when you are ready. However, for people who are waiting to buy, it might be worth considering purchasing a home sooner rather than later if you are able, so you can take advantage of the low rates.

Now, what dictates interest rates? What is inventory looking like in MN? And how is the pandemic currently affecting the real estate market? Please see the information below from one of our trusted Loan Officers:

• Rates decreased marginally over the course of the week as the bond market (which dictates rates) continued its quiet pattern. Compared to last week, the 30-year fixed rate decreased .04%. On a year-to-date basis, rates are now 1.13% lower than they were at the beginning of the year. 

• Purchase activity has rebounded in a shocking way and is comfortably ahead of 2019 levels again. As has been the case for quite some time, tight housing supply remains a challenge for potential buyers. Joel Kan, the Mortgage Bankers Association’s Vice President of Economic and Industry Forecasting echoed this sentiment in his weekly commentary, stating “even with high unemployment and economic uncertainty, the purchase market is strong. Activity has climbed above year-ago levels for five straight weeks and was 18 percent higher than a year ago last week. One factor that may potentially crimp growth in the months ahead is that the release of pent-up demand from earlier this spring is clashing with the tight supply of new and existing homes on the market. Additional housing inventory is needed to give buyers more options and to keep home prices from rising too fast.”

• Bonds remain unusually sedentary at the moment for the simple fact that everyone is unsure about COVID. Headlines were consistent over the week: the virus is continuing to spread and forcing businesses to rethink their plans to reopen. However, markets have to take a lot into account when analyzing these headlines; they have to account for which state, how that state handled the initial outbreak, what type of data they’re using for measurement, whether they trust that measurement, etc… Needless to say, this is a complex task and the reason markets seemed to be hunkered down at the moment.

• Jobless Claims continued their “stability” in June, coming in at 1.5 million yet again this week. This signals a slow recovery for the job market as states face new infection numbers that could impede people getting back to work. Durable Goods rebounded to 15.8% in May, but markets didn’t seem to notice. Traders believe manufacturers may struggle for a while considering fresh COVID numbers and a depressed global economy, leading to the indifferent reaction. This coming week’s holiday-shortened calendar is led by the slew of employment indicators, with ADP National Employment, Non-farm Payrolls, and Unemployment Rate for June rolling in.

Thank you SO much for taking the time to read this blog. We are so excited to be in business, and we are in the business to serve.

If you are interested in hearing more about what is happening in the Real Estate Market, you could like to hear about monthly payment scenarios based upon different numbers, OR you have questions about Real Estate, please do not hesitate to reach out. We would LOVE to help!


Jose & Josie Ramirez
Life By Design Team
Keller Williams Realty Integrity Lakes
[email protected]