The housing market is experiencing changes, with increased inventory and fluctuating interest rates.
These rates significantly impact your monthly mortgage payment. Fortunately, there’s been a slight decrease in rates recently. For instance, Navy Federal Credit Union offers VA rates as low as 6%, though this depends on various factors like loan duration, credit ratings, and discount points; however, most rates currently hover around the high 6% range.
Other factors such as election years often influence interest rates. The real estate market plays a crucial role in the economy, with buying and selling activities boosting economic health. During election years, the current administration may lower rates to improve public sentiment, increasing real estate prices and transactions. This, in turn, stimulates the economy through home renovations, purchases, and state tax revenues.
There’s a common belief that the government doesn’t directly control interest rates, which are thought to be linked to the 10-year bond. However, the government can influence rates indirectly through bond purchases and other federal policies. For a deeper understanding, refer to resources like Investopedia’s article on how the Federal Reserve affects mortgage rates.
If interest rates drop by a point, two significant effects are likely:
- A surge in refinancing activities as homeowners seek to reduce their monthly payments. This can involve lowering current mortgage payments or consolidating debts into a more manageable payment plan.
- An increase in home prices due to limited inventory and a rise in buyer demand.
In conclusion, the direction of the housing market might not be the primary concern. Purchasing a home now, with the intention of refinancing when rates drop, could be financially beneficial in the long run, despite the need to initially manage higher rates. Investors often adopt this strategy, buying with cash and selling for a profit when rates decrease.
