Given the hot real estate market, it might be surprising to hear that mortgage rates are dropping. Yet, that is exactly what is happening. The rates are not record low, but they are down to 3.1%. We will cover why the rates are dropping and what this means for the real estate market and you.
Why Mortgage Rates Are Lower
The dropping mortgage rates are indicators of a cooling real estate boom taking over the country the past few months. Housing inventory is dropping and the price of homes is rising. The combination of these factors means that competition for homes is stiff, and many cannot keep up with the current prices.
There were similar rates mid-2020, but people could still have wiggle room to refinance their loans if necessary. Now, less borrowers are able to benefit from a refinance. Unemployment and inflation also impact mortgage rates. The recent jobs report will almost certainly change the mortgage rates to some degree.
How Low Mortgage Rates Affect Real Estate
Low mortgage rates allow people to afford homes and are an appealing reason to sell a home. Up until recently, there was a steady flow of buyers and sellers taking advantage of the good rates. But now, however, there are not as many homes for sale. Mortgage rates are remaining low despite a decrease in house inventory. This trend is important to follow since low mortgage rates without an active real estate market could have negative consequences.
Looking ahead, mortgage rates may stay consistent, followed by a period of steady increase. The future is dependent on how the coronavirus unfolds and the state of the economy. It’s hard to predict the rates as so many factors are in flux. People tracking the rates cannot be sure of anything at this point and can only make predictions.