13 May How interest rates affect housing affordability
How interest rates affect housing affordability
Our current Minnesota real estate market is based on supple and demand. The supply is almost half what it was a year ago and that has helped define our level of buyer urgency. The demand we are seeing is fueling not only by the lack of inventory but by the historically low interest rates. How low are they?
Current interest rates.
When I began in real estate interest rates were 14 percent and your principal and interest payment was roughly the same for a $100,000 mortgage then as it is for a $500,000 mortgage today. That level of affordability has added a sense of urgency for buyers today. The affordability is also one of the reasons for today’s double-digit appreciation.
What have interest rates been for the last 50 years?
Interest rates in the United States have averaged 5.52% from 1971 to 2021. That is twice what they are today. The all time high was in 1980 when they peaked to 20 percent and the lows we have seen in the last couple of years. Rates have been so good that many people have refinanced their mortgage each time interest rates went down by 1 percent. Just that reduction could save you $250.00 a month on a $250,000 loan.
With our current affordability if you can find the home with the payment that you are comfortable with for an extended period…then you should buy. If you love the house, you are in and your rate is one percent or greater than current rates…then you should refinance.
If you need advice on your home purchase or refinance, just call me at 612-386-8600. We can discuss your options and what is the best plan for you!
I hope this blog on “How interest rates affect housing affordability” was helpful.