3 Ways Low Mortgage Rates Impact The Value of Your Home

Dated: May 30 2020

Views: 13

The COVID-19 pandemic has had an effect on everything...

From travel to toilet paper stock at your local grocery store. However, there’s another effect you might want to keep an eye on if you’re a homeowner: Falling mortgage rates. In the United States, the Federal Reserve cut rates by half a percentage point on March 3 (to keep up with the market), then again by 1.5 percent on March 15 (in response to COVID-19). In Canada, the Bank of Canada cut rates by 1% on March 13.

What does this mean if you’re already a homeowner? The first answer is easy: If you’ve been thinking about refinancing, now’s a good time to lock in a low rate. But if you’re concerned about the value of your home (particularly if you’ve been looking to sell in the next year), the news is a little more complicated. Here’s how the latest low mortgage rates might impact home values:

ONE

The number brings out more buyers — typically.

Low mortgage rates motivate many potential homebuyers to take the leap into homeownership. When there are more buyers than there are homes, supply and demand apply and you can expect property values to increase. However, that’s the expected scenario when there are low rates without a worldwide pandemic. If COVID-19 keeps buyers at home and properties linger on the market, price cuts abound and then create a trend towards lower home values.

TWO

Low rates here means low rates elsewhere.

Interest rate changes don’t just affect mortgages, it also affects savings accounts, CDs and other investments. Lower rates of return elsewhere mean less capital that could go into purchasing real estate, a factor that puts “supply” ahead of “demand.” Ideally, though, lackluster rates of return could motivate potential buyers to put their money into real estate instead, leading to a rise in home prices (and home values).

THREE

Buyers could be waiting for even more cuts.

While no one knows the long-term effects COVID-19 will have on the economy, many anticipate another rate drop to follow. Potential buyers might take a “wait and see” approach, which leads to homes languishing on the market, price cuts and possible trends in lower home values as a result if it’s a long-term issue.

Overall, the low mortgage rates generally mean good news for sellers, but the current pandemic does add an element of uncertainty that brings caveats. While national trends are an important factor to watch, your best indicator of where your local market is going is by keeping an eye on your neighborhood — and getting in contact with a realtor who already is up on the area.

Blog author image

Michelle Porter

I have been a leader in Greensboro’s real estate market since 1994 and have consistently been a top producer in many segments of the Triad market. As a Greensboro native, I have extensive knowledge....

Latest Blog Posts

Weekend Guide: Sep 24, 2021

Your Local Weekend GuideIf you're looking for fun, entertaining and educational things to do in the Greensboro, NC area, you've come to the right place. Our Weekend Guide is packed with a variety of

Read More

August 2021 Market Snapshot for the Triad

If you're thinking about selling your home, it's important to have a good understanding of what's going on in the Piedmont Triad real estate market. Knowing the most important data such as the

Read More

July 2021 Market Snapshot for Greensboro

Stay up to date with the latest trends in the Greensboro, North Carolina Real Estate Market with Top Realtor Michelle Porter. July 2021The White House recently announced additional measures to

Read More

Meet Buyers Jay and Dawn

Meet Jay & DawnJay and Dawn decided to relocate from the Chicago area to the Triad NC area for a job transfer. They were referred to us by a third party relocation company because of our

Read More