Today we are going to discuss the impact that low interest rates have had on the St. Louis market lately. Low rates have had many different effects on the market. One of them is that many renters are seeing homeownership as a more reasonable and better investment than renting. In fact, the monthly costs are quite similar and right now, starter houses can be bought opportunistically.
Low interest rates have also improved the value of move-in ready homes. Buyers will spend a premium so they don’t have to use out of pocket dollars to update their home. Every $10,000 that a prospective buyer pays is about $50 to $60 on a monthly mortgage payment. They would rather pay slightly more on their payment than a significant amount of money out-of-pocket.
These rates have also made refinancing a popular option for homeowners who would have had to sell otherwise. They also stimulated the housing market, because many buyers who are in the market right now are looking to make a purchase before rates increase significantly.
We absolutely project that rates will go up this year, but we just don’t know for sure. We’ve seen things ebb and flow over the last few years, and in many cases we are still seeing interest rates in the 3.7% area. When you look at where rates were 20 years ago at 15%, we are seeing incredible affordability right now.
If you have any questions for us about interest rates or anything else relating to the real estate market, give us a call or send us an email. We would love to hear from you!