How Absurdly Low Mortgage Rates Are Driving The Boston Real Estate Market

Katie Beth - 07/12/12

Mortgage Rates dropped again this week to 3.56%.

Let me be clear. That’s not an ARM rate or a “teaser rate”. That’s the 30 Year Fixed Mortgage rate that Freddie Mac measures. It’s the lowest mortgage rate in history.

That’s having a direct impact on the Boston real estate market. Sales activity is up substantially this year compared to the last few years, severely limiting inventory on the market for sale and even starting to put upward pressure on prices. In this edition of Charlesgate TV, P.T. Vineburgh and Ravi Pahuja discuss how current mortgage rates are affecting the Boston real estate market.

Video Highlights:

Lender Guidelines (0:36) – new mortgage products that are more attractive to buyers
Interest Rates (1:21) – adjusted and fixed rate mortgages are at all time lows
Refinancing Activity (1:59) – examples of property owners able eliminating their private mortgage insurance (PMI)
Private Mortgage Insurance (2:32)- what exactly is PMI?
Lack of Inventory (3:15)- Available properties for purchase are at a record low

Advice for recent buyers who are paying PMI:

In the video, PT and Ravi explain that private mortgage insurance is something you pay (on top of your mortgage payment, taxes, and insurance) if you put less than 20% down when purchasing a property. The quotes from Balsiger Insurance will greatly help one in assimilating what this concept is about. If you are paying private mortgage insurance in the Boston area, you should consider refinancing to see if your home has appreciated enough to eliminate your insurance payment every month. (aka: saving you money!)

Why is low inventory driving prices up?

In regards to the real estate market, there is a lot of demand from buyers, and little inventory. In fact, inventory is 25% lower than last years levels and 50% less than 2006 levels. In many situations we’ve seen multiple offers on one listing, driving final bids above asking in many cases. Why?

Desire to buy the property: because buyers know there is a lot of demand and they may not be willing to risk the amount of time it may take for another property they would like to become available.
Low interest rates: offering more money on a property won’t drastically increase their monthly payment, and being able to lock in such low rates for the long run offsets a higher purchase price.

Are you buyer?

Inventory is low even though everybody wishes there was more at this point. This is a major reason why you have to be ready to make a move when you find the right property for you. Also, make sure to find the right buyer agent to represent you. You need one who will really be aggressive on your behalf, and get you into new listings before anyone else. You also need to be prepared financially so you will have all the balls in your court when you are ready to make a move.

If you’re interested in learning more about your mortgage options or have any mortgage questions, just contact Ravi Pahuja. For buying related questions, contact us to set up a buyer consultation.