It is no secret that interest rates and real estate prices are intertwined and as such whenever there is a change in one it subsequently affects the other. If you’re an experienced real estate buyer or seller, you’re probably no stranger to the unfavorable side effects that these two can cause from a successful “playdate” on the market. Off course the interest rate seesaw can be advantageous to buyers, but what happens if the seesaw breaks with you on the wrong end?
Real estate prices have definitely been on the raised end of the seesaw long enough to alert most Americans. The current median price for new homes is $269, 800, a 0.41% increase from the previous month and a 4.94% increase over the last year.
Recent market analysis revealed that most prominent cities have experienced dramatic increases in housing prices and specialists expect these rates to hold until late 2015. Nonetheless some markets have still managed to outperform others. Arizona, is still home to some of the most prosperous real estate markets in the country and is highly recognized for constantly surpassing the national average for home sales. The market has topped the national average with a 31% steady increase in sales for over 160,000 units.
Real Estate Prices and Interest Rates
The real estate market is always evolving, and the partnering of interests rates and property prices can either mean higher expenses or increased savings for individuals. Comparing mortgage payments in 2011 to present day may help you better understand this complex partnership and predict future events within the market.
The current average mortgage loan size in Arizona is $186,391 for properties valued up to $250,000 and the standard variable rate is set at 7%. However, this is negligible when compared to other states. Real estate shoppers today typically have to dig deeper into their pockets for a spare $100,000 in comparison to two years ago.
For the most part, this indicates that real estate shoppers are now able to make larger housing deposits at the price of paying higher interest rates. However, if you refinance, you can get lower rates.
The Ever Changing Real Estate Market
On the outside it might seem like current market events equate to increased savings for real estate buyers but the interest rate seesaw may not necessarily be favorable to buyers as discussed earlier. The changes in property and interest rates over the years represent the unpredictable nature of the market and demonstrate it will continue to change.
The real estate market relies on a number of coexisting elements that are essential to determine the affordability of properties within it. The bottom line is you cannot rely on any single element, whether it is interest rates or property cost. However, you should establish a balance between these elements that may determine the success or failure of your investment.