How current interest rates are affecting market prices for houses and apartments

Posted by Techyscouts | Posted on 01/10/2024
  •  Real Estate
  • Is it a seller’s market, or a buyer’s market? Sometimes it is neither, particularly when interest rates on real estate loans are much higher and inflation is driving up the cost of everything. Mike Millea, a Los Angeles conservatorship and real estate broker, can show you how loan rates impact investing in real estate. Give him a call today.

    High-Interest Rates Discourage Buying

    When the interest rates on home loans are high, investors don’t want to take the chance of losing money on their investments. The loans for the property would have enormous monthly payments that would be difficult to cover at current market rental rates. If something had an adverse effect on their financial situation, it would affect their ability to cover the mortgage payments and receive the expected return from investing in the property. Investors making sensible investment decisions would not take out a high-interest home loan, no matter how lofty they expect their return to be.

    Conversely, if home loans are low, usually below 3%, investors are more willing to take a chance on a property. The lower the going interest rate, the more likely it will be that investors will be willing to take out a loan for an investment property.

    How Interest Rates Affect Market Prices

    When sellers know that investors can buy more houses, prices on homes rise. Prices on homes may also rise due to inflation and higher interest rates. Investors who can take out larger loans with lower interest rates are willing to pay more for a property, while smaller loans at higher interest rates restrain investor spending. This can make it very difficult for sellers to sell a home without lowering the asking price and reducing their return on investment.

    Between 2017 and 2021, the housing market was fueled by artificially low interest rates promoted by the government. Even when interest rates began to rise, the housing market remained hot and many consumers looking to buy a home were outbid by investors who paid cash or qualified for lower interest rates on loans. Fear of missing out on buying a home, any home, and inflation caused a unique seller’s market scenario.

    Today’s high interest rates for loans have not only affected the market for single-family homes; it is also affecting the purchases of multi-family dwellings. Many people who are interested in buying condos or apartments are sitting on the sidelines waiting to see if interest rates or prices will decrease before they make a decision. Rental prices are currently decreasing in many housing markets, but it remains to be seen just how far prices will fall. 

    Investing in Property

    A West LA probate real estate broker is necessary to buy probate real estate if you’re interested. Those who pass away leave an estate that needs to be sold quickly or sit in probate until probate settles. It’s a quick sale with reasonable returns. Talk to a West LA probate real estate broker about properties close to you.


    When You Should Buy or Sell

    If you are looking to sell, it may be time to list. If you are looking to buy, you could pay thousands of dollars less on your home loan. Consult with Mike Millea today on real estate investments and see what hiring a Los Angeles conservatorship and real estate broker can do for you.

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