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Did You Know... Mortgage Rates Hit New All-Time Historic Low (again)!!


Last week mortgage rates hit a new all-time historic low (again)! Yes, seriously – and I say again because I am starting to feel like a broken record telling people about historically low rates, only to see that there is another week where the average rates have fallen yet again, creating another new historic low. Rate fluctuations are always happening and the actual rate an individual will receive on their home loan will be determined by a qualified lender after review of each person's financial situation. But, it is very interesting to understand how the general trends impact the options buyers and sellers are encountering.  To help put this into perspective, we'll break it down together and see what these new historic lows can mean for you. 

So, to start, lets take a look at some history and see what interest rates have actually been. The chart below includes information pulled from Freddie Mac on the average mortgage rates for a conventional 30 year fixed rate loan over the past 50 years:

Conventional 30 Year Fixed.png

As you can see, there have been some big swings and a general downward trend in average rates since the highs of the 1980’s. At one point in the early 80's the average interest rate was as high as 18.63% (yikes!).  We all understand that there are larger economic issues that are underlying with these numbers and these trends, but I wont analyze that and put you to sleep.  Instead, I want to look at this from a much smaller, individual perspective and keep you engaged by talking how these trends affect you, making it clear why these rates are important to pay attention to and what is at stake.  And it all boils down to huge savings and increased buying power.

Here is a familiar example I've seen a lot over the past few years, which I think will help illustrate this.  So, let’s say that you have been considering buying a new house for a while, but just haven’t made the leap yet.  Despite wanting to make the move, maybe timing hasn't been right or you haven’t found ‘the one’ yet (understandable with the low inventory of available homes that we are seeing).  And then 7 months ago COVID made its uninvited appearance, so you decided to hold off, maybe opting to stay put or even rent while you wait to see how the market looks as economic conditions change or things begin to feel more stable.  But as time keeps ticking by, you are still where you were when you first wanted to move 2 years ago and true stability seems like a fantasy.  Bleak, I know, but here comes the good news...

Lets say that when you first started house hunting 2 years ago, you set a budget for yourselves of up to $500,000. You are well qualified and planned to put down 20%, for a 30 year conventional loan.  So, did you know that in just the past 2 years, the average rates have adjusted to the point where you would be saving almost $400/month if you bought now vs. then?! Take a look below to see the breakdown:

2 Year Differences at $500,000.png

Good news right! That type of savings is seen at all points up and down the price scale.  This is great news for you because, no matter what size home you are looking at, it means more money in your pocket.  Or, you could look at it as greatly increased buying power, meaning that your home budget has increased while still maintaining the same payments. As an example, for the same payment you would have been making on that $500,000 home in Sept 2018, you could be making the same monthly payment today on a $620,000 home!  That is a huge jump in buying power and provides many more options to you as you conduct your home search. 

Equal Payments.png

Whether you look at this as the opportunity to have lower payment for the same house value or equal payment for a much greater house value, you can certainly see the advantages. But you may be thinking, look at what waiting has done for me, so I should keep waiting and see if there are more savings to be had. I wish I had a crystal ball and could tell you what was around the corner. There is little additional room to move down, so it is probably safe to say that locking in these great low rates now wouldn't leave you disappointed in the long run.  Of course, you still have to find the right house to make your home in - so this isn't all about dollars and cents, but it is a good thing to factor in all the same.

This is of course equally as important for sellers who are on the fence about listing their house to be aware of as well.  Why?  Because buyers are really motivated right now to take advantage of these great rates.  Buyers are active and hungry for new listings.  Maybe your current home is 'the one' for someone else?

If you have any questions or comments about this, from a buyer or seller perspective, please reach out and let me know. And, if you'd like to get more information from a lender and an individual quote for a specific interest rate that is available based on your unique financial situation, please let me know and I would be happy to provide you with some wonderful lender referrals.  And, as always, I hope that you find this information intriguing and useful, and hope its added some value to your day. If I can be of service in anyway, please reach out at anytime. 


How Can Real Estate Be Booming?


I recently provided some information on home sales in Tucson to a client, highlighting homes sold in a manner of days and many above asking price within a particular neighborhood in the Foothills (though this is being seen all around town).  This client was quite surprised at the strength of the market and I received back an emphatic "Doesn't make sense!" citing many anecdotal items relating to the economy in general and labor market conditions due to the pandemic. Since I am certain that this one person isn't the only one out there who is surprised by the strength of the market, I thought I would share my thoughts more widely. 

So, in response to the statement of "Doesn't make sense!" my response was as follows:

I certainly understand – a booming real estate market (and stock market too) just doesn’t seem congruent with everything happening in the world related to the pandemic.  There are many anecdotes that lead to that feeling – lost jobs and/or income reduction being the big ones.  However, the data helps to make sense of much of this real estate market boom – low inventory of available homes for sale and historically low interest rates being a leading cause. 

Pre-pandemic there was already a low inventory of available homes, but that seems to have been exacerbated by the pandemic some.  Low inventory leads to rising prices and this multiple offer/above asking price situation we are seeing here.  There are many reasons for low inventory, but one is just the cycle of people not listing their home until they find a new one to buy, and finding that new one to buy (whether upsizing or downsizing) is harder with less inventory.  Another reason for the lower inventory is an influx of people into Tucson from out of state and large cities, mainly California and Washington.  This was also happening pre-pandemic, but now as people are at home more, they want more space, and aren’t tied to a big city for work.  So people are moving here (and other mid-sized metro areas) for better quality of life.  And those buyers often come in with cash and often are buying higher end properties (though not exclusively of course).  

Also, interest rates are historically low, which makes it very advantageous for buyers in this market.  Lending practices aren’t loose either, they are pretty tight and have been tightening even more to ensure that buyers are fully qualified.  But, with it being very cheap to borrow money, that is opening up many opportunities for buyers to lock in low interest rates and purchase homes.  This is also why there are multiple offers happening on many lower and mid-priced homes.  Strong areas of town, nice home and appropriate pricing will bring buyers to the table, and many buyers are out there looking for something similar.

That doesn’t mean this wont change as economic impacts from the pandemic continue or moratoriums on evictions and foreclosures end (currently the default and delinquency rates are low). But for now, all indications are the real estate market is strong in Tucson.  As a seller, prices are great and there are many available buyers.  As a buyer, there is a strong benefits if you are financing and many personal incentives (more space, better quality of life, sick of your current house after being there so much!).

All-in-all, this is a very interesting & exciting market to be helping clients in.  Having someone to help you navigate it fully is really key to reaching your real estate goals - whether that is buying or selling.  If anyone has any questions, comments or would like to discuss anything mentioned further, please feel free to give me a call.  Until then, stay healthy and cool!

Southern Arizona Plains

  Katie Smirnov, MBA

  Mobile: 520-468-8584

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