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How Interest Rates Influence Buying and Selling Trends in University Hills Real Estate

March 5, 2018

Buying and selling a home is both exciting and a lot of work. While an experienced real estate agent will help you find the best options for your budget, there are other factors at play that determine how and when a house will sell. One of the most important factors that sets the tone for the housing market in Observatory Park is the average mortgage interest rate influenced by the Federal Reserve. This rate can change by the year, but depending on how high or low it is, you’ll either see increased sales or decreased housing prices. Here’s a brief guide of how this rate influences the housing market.

What Really Influences Interest Rates

The economic success and performance of the country largely influences interest rates advertised by mortgage brokers and loan providers. When the economy is successful and the unemployment rate is relatively low, more people have spending power. This allows the Federal Reserve to increase the interest rate at which they loan money to the banks. This rate increase then determines the interest rates those banks and financial institutions offer to prospective lenders. If the economy is in a slump, the Federal Reserve often lowers the interest rate, making it easier and more affordable for individuals to get a loan, whether they’re financing education or purchasing a new property.

How This Impacts Sellers

Low interest rates mean more individuals can afford to purchase a home. The more people actively looking to buy a house, the more competitive the market is. This allows sellers to ask a higher price for their property without diminishing the chances of making a sale quickly. When interest rates increase, it significantly decreases the competition in the market, often resulting in lower selling prices and fewer offers. While there’s nothing wrong with leaving a house on the market for an extended period of time, it can make it more difficult for sellers looking to move quickly without increasing their financial burden and doubling their mortgage expenses each month.

How This Impacts Buyers

Generally speaking, low interest rates make the real estate market function in favor of the sellers. More people looking to buy means more offers on each property and higher purchasing prices. This allows the sellers to be more selective in deciding who to sell their home to. During high interest rate periods, buyers have the ability to negotiate more, even though the mortgage might be more expensive. Often, this results in lower selling prices. However, since demand is lower when interest rates are high, finding a suitable home may take more time as fewer homes will be on the market in the first place.
Though these are trends in the Observatory Park and University Hills real estate market, they’re not set in stone. The market will fluctuate based on overall job growth, the needs of the community, and often, the time of year. To help you get the most out of your real estate search, contact the team at Elevation Realty. Our dedicated staff understand the unique challenges of buying and selling homes in the greater Denver area.