How Low Mortgage Rates Are Affecting Housing Affordability

Dated: 06/30/2020

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How Low Mortgage Rates are Increasing Home Affordability this Summer


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It’s no secret that mortgage rates have dropped to historically low levels in 2020. It’s also not a secret that home prices in Pinellas County and the Greater Tampa Bay housing market have continued to increase. We hear from home buyers all the time that they’re worried they might be buying at “the wrong time” since prices are so high on homes. However, based on recently released data and today’s mortgage rates, we’re here to explain why that’s simply not the case.


At the time of publication (June 30, 2020), Doug Wagner of Cross Country Mortgage reported that well-qualified buyers “could lock in rates as low as 3.125% on a 30 year fixed rate mortgage with zero points.” That means on a home that’s $300,000 with a 20% down payment (aka $60k), a homeowner would be looking at a monthly mortgage payment of $1028 (not including taxes and insurance) on a $240,000 mortgage. Now let’s say that home was 10% cheaper last year. The purchase price would be $270,000, but mortgage rates were closer to 4.5% 12 months ago. With 20% down ($54k) your loan payment on the balance of $216,000 would be $1094 per month, which is actually $66 higher per month despite the lower purchase price.

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The scenario above is exactly why you keep hearing us say that it’s a good time to buy a home. Your average monthly payment will likely be LESS than what you’re paying in rent and LESS than what you would have paid had you bought a home at a higher interest rate last year. Additionally, many VA Loan and FHA Loan buyers qualify for even LOWER rates than what we're seeing on conventional loans, making it even more affordable for vets, active military, and first-time home buyers to purchase a home.


To make the case even more compelling, First American Financial released their “First American Real House Price Index (RHPI)"today based off of the April 2020 stats and showed that “if the average household income remained the same in April as it was in March 2020 (no growth), house-buying power would still have increased by nearly $8,000 compared with March, simply because the 30-year, fixed-rate mortgage declined 0.14 percentage points.” Even if income declined by 1% from March to April, they found that “house-buying power would still be $3,500 higher than March due to low rates.”


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Not only are low mortgage interest rates making housing more affordable for buyers, but it's also benefiting sellers right now. Prices continue to increase as demand outpaces the housing supply in Pinellas County, FL. On average, sellers are finding they can get upwards of 96% (or more) of the original list price when they price their homes according to the market (we handle that part for you!) and in the past 7 days, out of 658 homes that went under contract in Pinellas County, 47% of them did so in 14 days or less. As far as inventory goes, we have a LONG WAY TO GO before the market ever becomes saturated. According to a recent report from MBS Highway, the current population in Pinellas County,FL is just shy of 975,000 people and there are just 6 homes for sale per 1,000 people in Pinellas County right now. Mind-blowing, right?


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Regardless of whether you're buying or selling a home, the best thing to do right now is to talk to us about your real estate goals. We have the market knowledge, experience and data to ensure you have the right knowledge and the right plan to be successful in your real estate endeavors. 

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Andrea Hartmann

Andrea is the Managing Partner of The Sandy Hartmann Group. Andrea was born and raised in the Tampa Bay area and is a licensed Realtor with over 15 years of Marketing and Finance experience, holding ....

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