Low Inventory And Low Interest Rates: The Keys To Rising Home Prices!

After, over 15 years, as a Real Estate Licensed Salesperson, in the State of New York, I have come to strongly, believe, the two major factors (and keys) to the historic, rising home prices, are the extremely – low, inventory, and historically – low, mortgage rates! In the past year, in most areas of this nation, house prices, have risen, at, never – before, seen, percentages, etc! Simultaneously, there is also, an extremely – low inventory, of house, available, for sale, on the market. The combination of, the impacts, regarding, supply and demand, and, the affordability, created, by these mortgage interest rates, are the two major factors, in terms of rising costs, of purchasing houses. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, these two keys/ factors, and what they indicate, etc.

1. Low Inventory: A number of factors, probably, have contributed to the extended, current period, of extremely – low inventory, of houses, for sale, in many regions/ areas/ localities. Some of these causes, include: the stresses, and uncertainties, stemming from this horrific pandemic; buyer – interest, because the crisis, has also, increased, the desire, for many, to relocate; and, lack of certainty, by homeowners, on what to do, if they sold. The economic laws of supply and demand, teach us, when there is limited supply (as there is, today), demand outweighs, it, causing, often, price increases! This creates, what is referred to, as, a Sellers Market (more buyers than sellers, and demand, creating an advantage to the seller).

2. Low mortgage interest rates: Few remember, mortgage interest rates, at the low – level, we see, today! Because of this, buyers are able to buy, more home, for their dollars. Since, most people, buy a house, taking advantage of a mortgage, in order to fund, their purchase, it is often, the most important, relevant factor, in whether, or not, one can afford a specific property! In that regard, it’s essential to remember, and appreciate, a 1% difference, on, for example, a $200, 000 house (which, at 20% down, requires, a $160, 000 mortgage), comes to, about $100 per month, difference/ savings. In many regions, the average mortgage is far higher, meaning a $400, 000 home (with $320,000 mortgage), sees a $200 monthly difference, and $600, 000 one, would create a $300 savings, at the lower rate. While, this lets more people, afford houses, it also has the result of creating, added demand, and rising prices!

When, you better understand, the relationship between these two factors, and the housing market, you become, better prepared, to proceed, wisely, using the best approach, and making the finest decisions, for you. Will you be a more aware, wiser, potential home buyer?

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