South Lake Tahoe Real Estate May be Affected by Low Interest Rates

Mortgage Rates Continue Falling to Record Lows
For the fourth consecutive week, mortgage rates have fallen to all-time lows. The 30-year mortgage rates averaged 5.01 percent this week, which is a drop from last week’s 5.1 percent. Last year at this time, rates averaged 5.87 percent.

“Interest rates for 30-year fixed-rate mortgages fell for the 10th week … due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” says Freddie Mac Chief Economist Frank Nothaft.

Other rates also dropped for the week:

• 15-year fixed rates: dropped to 4.62 percent from 4.83 percent last week. Last year at this time 15-year mortgage rates averaged 5.43 percent.
• 5-year hybrid adjustable-rate mortgages averaged 5.49 percent, a drop from 5.57 percent last week.

The only slight increase in rates this week was in 1-year ARMs, which were 4.95 percent, up from 4.85 percent last week. Overall, 1-year ARMs were still down for the year from last year’s 5.37 percent.

Freddie Mac began tracking rates in 1971.

Source: The Wall Street Journal, Amy Hoak (1/09/09)

Interest rates are a very important factor to consider when timing a real estate purchase. When purchasing a $300,000 home with a $250,000 30 year fixed loan at 5.01% including tax and PMI, the payment would be $1708.17 and the total of all payments would be $614,939.65. The same scenario with a 6% interest rate would raise your payment $155.29 to $1863.46 and raise your total payments to $670,845. There are a lot of buyers looking at homes in South Lake Tahoe right now that are trying to time the bottom of the market. When rates rise to 6% it will be like paying $55,906 more for a $300,000 home using a 30 year fixed rate loan.

I think that these low interest rates will stimulate the South Lake Tahoe Real Estate market. However it is still important to buy undervalued properties from motivated sellers or foreclosures in order to offset any future declines in the market.

For more information about South Lake Tahoe Real Estate, loans, or houses on the South Lake Tahoe MLS, contact Brent or Jill Johnson.