What makes interest rates such a key factor in the real estate investing market?  How do interest rates signal investors about opportunities in today’s market?

• Mortgage interest makes up a significant part of a home buyer’s monthly payment.  Lower interest rates mean lower payments, and that makes a higher-value home more affordable to a buyer.  Without any change in the sales price, an interest rate movement of fractions of a point can mean a buyer does or doesn’t qualify for a loan, based on the monthly payment.

• When interest rates are as low as they are today, real estate investors have more buyers who can afford their properties for sale. Today’s interest rates are at historic lows.  Home buyers today can afford higher-value homes than they could when rates were closer to the average rates of the 10-20 years before the housing market crash.

• Buyers who are shopping for their next home anticipate that interest rates may go higher as the economy recovers, motivating them to make a decision and close a deal now.  Average time on the market before sale is falling dramatically, with almost 30 days less time on the market in the last year alone.  For the real estate investor, this lowers the holding costs of a fix-and-flip property.

• Banks are willing to lend more money to more buyers when interest rates are low and average home sale prices are rising.  Buyers can qualify more easily for a loan when lower interest rates lead to lower monthly payments.  Banks know they are less likely to end up with a property worth less than the loan. Not to mention the federal backing of over 90% of the loans on the market through FHA, Fannie Mae and others.

The Federal Reserve has kept interest rates low to help the recovery along.  The longer the Fed maintains low rates, the more favorable for the real estate investor with strategies that are successful in today’s market.

This is a favorable time for real estate investing based on interest rates alone, as well as other factors such as rising average sales prices, reduced inventories of unsold homes, fewer foreclosures and shortened time on the market before sale.  Don’t wait on the sidelines and let this chance pass you by!

Are you noticing properties for sale closing faster than they did a year ago?

If you are new to real estate investing and exploring this process, I suggest starting with my free ebook guide to finding undervalued properties.