Some Luxury Housing Market Sectors
The buyers of ‘entry-level luxury’ overseas investors and all those who want to benefit from their real estate assets might get the advantage from lower rates of mortgage: but it won’t make any difference to the ultra-luxury market.
According to the news the Federal Reserve of U.S. is going to make big news by the end of July that could have a strong impact on the domestic as well as the international market. It might reduce the rates of federal interest that are also known as ‘Federal Funds Rate’. It is the first time since the financial crisis of 2008, after which there has been a steady increase in the rates till 2015. This change might have a positive effect that may be in favor of the “entry-level” luxury apartment buyers and the local investors as well as the overseas purchasers who want to invest in the business of real estate in the U.S.
As far as the definition of the federal fund rates is concerned “the federal fund rate is the rate at which the banks with balances held at federal reserve, the central bank of America, can borrow on an overnight basis.”
The fed’s fund rates and the mortgage interest rates do not have any direct connection, and that’s what the economists are anticipating to be cut at the end of July, the U.S real estate market might feel the effect in some of the ways, especially as far as the lower part of the market is concerned where the futuristic buyers and those who are buying the property for the first time are trying to find their ways.
A broker from New York city Melissa Cohn says that the mortgage rates have been following the rate of 10 year Treasury bonds, which is directly linked with the Federal Fund rates. Melissa is also the executive vice president of a group called “Private Client Group” at the firm Family First Funding LLC.
According to Melissa when the yield of treasury bond goes up the mortgage rates are also up and when it goes down the mortgage rates move accordingly.
How much will the rate change affects the real estate business will depend on much decrease the Fed will make in the rate which is fixed at 2.5% till date.
Miss Melissa thinks that most of the economists and brokers have been thinking that the rates will change by 31st July, but it is not clear whether it will be decreased by one-fourth of a point or half percent.
The effects that the real estate business might feel will definitely take a long time maybe some months to be evident in the market. According to Melissa and other experts if the minimum reduction in the mortgage rate is at least half a percent only then the effect might be seen on the real estate business.
University Of Miami Business School
A professor from the University Of Miami Business School Andrea Heuston says that the market is already full of so much credit especially the real estate Luxury property side as well as the commercial market that the reduction of mortgage rates might not affect the business of both the commercial real estate or the luxury real estate to a considerable extent.
According to Ms. Melissa Cohn, many economists are speculating that Fed might cut the rates multiple times in the near future and if this really happens then the mortgage rates might also drop to a considerable rate and it will be very beneficial for the real estate luxury market. Ms. Cohn added that the lower rates mean that the buyers of real estate will definitely have to pay less as monthly mortgage payments and this might act as an incentive for the buyers to buy more properties.
Some of the experts say that no matter if the rate is lowered once or more times it may make the difference that is needed to motivate the buyers to buy more. The people who are looking for the low-end Luxury market properties might be able to buy more. A bonus for the buyers of “entry-level” luxury properties
All the buyers looking for the luxury properties at the minimum prices will benefit the most from the decrease in the rate of the mortgage. A real estate agent from Los Angeles called Tami Pardee who is the CEO of a brokerage firm known as Halton Pardee says that they are all really excited about the change in the interest rates that the Fed is going to make. He said that if the rate is reduced according to the expectations of the property dealers there will be a remarkable increase in the number of buyers.
According to eth current statistics, the company Tami Pardee is working at deals with the properties of southern California the estimated prices of which range $950,000 to $6 million and the number of the properties range from $1 million to $ 2 million.
According to Tami Pardee in the part of the market, they are dealing with they encourage the clients to buy with a 10 years mortgage plan as it builds the appreciation; she says that the 3-5 years mortgage plans are too short. Most of the buyers of property like the security and safety of signing the deal with low rates and know the exact amount they will have to pay.