How Have Interest Rates Made a Difference?

It’s almost universally known that in today’s current residential real estate market, it’s a great time to sell a home. The low inventory of homes on the market has made prices rise and competition fierce. This can be potentially discouraging for home buyers, especially first time buyers. But, as always, there is a Silver Lining. And that silver lining is the incredible interest rates that we are experiencing right now. In this article I will shed some light on the incredible buying opportunity that these low interest rates have provided.

My client David took advantage of great rates and bought his first home this summer!

It wasn’t in ancient history when interest rates were over 10%. In fact we only have to go back to 1990, when parachute pants were hip and stylish, when the average interest rate for buying a home was over 10%. Since then we have seen a fairly steady decrease to the low rates we are seeing today of around 3%. This puts A LOT of buying power in buyer’s hands. In fact it wasn’t long ago at all – in the summer of 2018 when the interest rates were at about 5%. So, lets look at that as an example.

Let’s say you were looking for a home for $200,000 in 2018 and were putting down a 10% down payment. This would leave you with a mortgage of $190,000. If your interest rate was 5%, your monthly payment would have been $967. Today, if you buy a $200,000 home with the same down payment at 3% interest, your monthly payment would be $759. In fact, if you look at the 2018 payment of $967, at today’s rate of 3%, you could afford a home valued at $255,000. So, if nothing in your financial picture changed, you could afford a home worth $55,000 more today than in 2018. That’s a serious increase in buying power!

Additionally, if you did purchase in 2017-early 2020, it might be an incredible opportunity to refinance your mortgage and get a significantly lower mortgage payment. This would be especially beneficial if you plan on staying in your home for a long time. I have seen rates as low as 2.5% this summer and I have heard of even lower.

This brings up the great question of “When is the right time to buy?” I would argue that now is. Real Estate prices rise over time. This is an undisputed fact. Yes, there are dips, just like the stock market, but they can and will continue to go up in the long run. In the last year in Dunn County, prices have increased 13.5% from 2019 to 2020 year to date. That may not continue forever, but you cannot benefit from appreciation if you do not own property. And, you can lock in at a fantastic payment and interest rate this fall.

If you are interested in exploring buying a home this fall, please give me a call at 715-529-0239 or email me at I would love to hear from you!

Until Next Time…

~ Tim Nelson | RE/MAX Affiliates

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