Browsing Tag

Interest Rates

APR in the News Buyer / Seller Information

What do low interest rates for the foreseeable future mean for Bay Area real estate?

September 30, 2015

Hazel Carter
Tiburon / Belvedere

Question: What do low interest rates for the foreseeable future mean for Bay Area real estate?
Answer: It is a relief for buyers to hear that interest rates are holding for the time being. However, when buyers think rates could be on the verge of escalating, it does motivate them to purchase. Sellers are certainly relieved, comforted by the concept that money is relatively easy to come by and should continue to keep buyers motivated.
Conversely, when I first began my career in real estate, interest rates were 18 percent — a good reminder that it is important for those considering buying to take advantage of these current rates.

Read more opinions on SFGate.


APR in the News Buyer / Seller Information

Interest rate hike delay means what for Bay Area buyers, sellers?

September 8, 2015

Tom Dreyer
Mill Valley

Question: Interest rate hike delay means what for Bay Area buyers, sellers?
Answer: If the Fed continues to hold rates at present extraordinarily low levels, it should support and enable the hot local sales market. Low rates provide a clear incentive for all types of buyers as they are able to leverage additional buying power — and are able to borrow more without dramatically increasing their expected payments. With a stable rate, buyers willing to hold a property for at least five years can increase the chances of making money on the eventual sale.
That said, a small, incremental increase in rates by the Fed over several quarters typically will create a spike in buyer activity, while they fear their “buying window” may be closing. Over the long term, it also may price out some buyers until the market becomes more balanced.
The past weeks’ volatility in the stock market, should it continue, is a greater concern to me insofar as consumer confidence is concerned. If consumers do not feel financially stable, it can have a large impact on the real estate market.
Read more opinions on SFGate.

Buyer / Seller Information Market Updates

Unique Opportunity in Today's Real Estate Market

November 5, 2012

Author: Bob Gerlach, Vice President and Manager of Alain Pinel Realtors Palo Alto
As I’m sure you’ve heard interest rates are at record lows. Today, a new home owner can get a fixed rate loan in the low 3% range or a variable rate loan in the high 2’s. If someone had told me that interest rates would be this low, I wouldn’t have believed them!
Since rates have been a bargain for some time, it seems to have desensitized us to the fact that this is a unique opportunity for homeowners that has a huge impact on affordability.   And… based on historical data, these rates may not be around forever.
Let me add some context to this – when I started in real estate industry in the 1970’s, interest rates hovered around 10-12%.  In the early 1980s, I saw interest skyrocket to above 15%!  I remember one sale in particular that we closed at 18% – and the buyer was thrilled that they didn’t have to pay 20%. According to Freddie Mac, the average interest rate in 1981 on a 30-YR, fixed-rate mortgage was 16.63%. That’s almost 4 times as high as rates are today.
Below is a graph that tracks the interest rate from the early 1990’s to present day.

As you can see,  this clearly indicates that our low rates today are uncommon.  If we look at it from a historical perspective, interest rates should start to creep back up over time.  If this does occur, it could have a significant impact on a buyer’s borrowing power.
What impact does an interest rate increase actually mean to the consumer? Let’s look at an example – a $1 million 30-YR, fixed rate mortgage with average interest rates from 1980, 1990, 2000, 2010, and now.

Today’s monthly payment on a $1 million loan is reduced by nearly half from 1990. Over the course of the mortgage, this results in over $1.3 million in savings on interest. Even if you only look back just two years to 2010, you save $700 on your monthly payment – resulting in over $250,000 savings over the mortgage.
Let’s look at this a different way – let’s say your budget allowed for $7,372 in monthly payments. In 2000, you would only be able to take out a $1 million dollar loan. With today’s interest rate, to have that same payment, you would have to have a loan of $1,647,730. That is an increase in purchasing power of almost $650,000. We aren’t talking about minor increases – today’s interest rates allow for a significant increase in what price home you can afford.
At Alain Pinel Realtors, we understand how rare these interest rates are and the very real affect they have on consumers. Contact your REALTOR® and see how much more buying power you may have today.

Chart is reproduced with permission from All average interest rate data is from Freddie Mac unless otherwise noted. This article recently ran in the Palo Alto Daily News publication Premier Homes.

About Author:

Bob Gerlach currently serves as Vice President and Manager of the Alain Pinel Realtors Palo Alto office which has consistently been one of the top producing offices within the company. Bob started his real estate career in 1977 as a sales agent, yet quickly moved through the management ranks. For more information call Alain Pinel Realtors Palo Alto at 650-323-1111 or email at