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March 20, 2020 23 min

Today, we're gonna talk a little bit about interest rates, because there's been some pretty substantial changes on what's going on in the market for sure. So always a hot topic with buyers and sellers with what's going on, but we're entering into some unprecedented times right now, so to avoid triggering all the regulation Z disclaimers and disclosures we have to go through, we won't get into very specific rate quotes, but, my goodness, Jon, we're in the low 3% range for just plain old vanilla 30 year fixed rate loans. It's getting, again, to the point we're almost at all time lows.

- I mean, when's the last time we saw something like this? How far do we have to go back to see interest rates of low 3s?

- Yeah, yeah, you know, 4 years ago we got pretty darn close and then prior to that we were sitting in a recession when rates were at super lows and there's a lot of things that are underpinning this, that are making this happen, but I think for our purposes the important thing is that this a tremendous win for buyers of course. It's a tremendous win for sellers too, you know, when sellers are entering the market, as you know, part of that question is "well how many potential buyers can I expose this home to?" And that exposure just got broader because now the affordability is more attractive and folks that maybe wanted to keep their purchase price here can now go here, and have the same kind of expense, the same monthly payment. So, it's a good thing, you never know how long it's gonna last, but for homeowners right now, and potential home buyers, it's really attractive.

- Just out of curiosity, how much more buying power does a one point drop in interest rates give somebody in general? Just in general terms, we don't have to get into specifics.

- So one point, so do you mean from four and a quarter down to three and a quarter?

- Yeah, say four and a quarter to three and a quarter.

- So I'm really gonna wing it here, Jon, but I'm gonna say 70 to 80 thousand dollars.

- That's huge!

- But same payment, yeah.

- That's the difference between being able to buy in a community and not be able to buy in a community.

- That's a good point, yeah. Now that's a severe window from low fours to low threes, but we're there, it wasn't that long ago that we were talking to home buyers, and the 4% interest range was the conversation. So, it's happening, home buyers are benefiting from it right now and home sellers hopefully too. Unfortunately, a lot of the things that are driving that are based on negative things that are happening in the economy, and the Coronavirus is big news right now as well and that's having a global economic impact too. So, it's not a positive that's it's happening because of that, and many economists are saying that this was gonna happen anyway, and the Coronavirus just sped things along, and that's a surprise for a lot of folks, you know, because a lot of folks look at where the stock market was, and they say "Everything is wonderful, "why would the interest rates be falling "because of negative news?" But what I like to say and I'm just mimicking a lot of economists, is that the stock market is not the economy. They're two different things, and there were a lot of indicators about average hourly work week, industry capacity, factory capacity that were down, and so these were things that are really the foundation of the economy, and this is why the interest rates have been pointing in that downward direction, and then the concerns over the Coronavirus and how that is gonna affect global economies is just speeding that up.

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