How Low Can These Interest Rates Go? Now Is A Great Time to Buy a Home in Silicon Valley!

Historically Low Interest Rates!

Each person, couple, family is different and the best timing to buy a home in Silicon Valley may vary wildly from one to the next.  But with interest rates this low – low 4s – it’s a good time to be thinking about making use of “cheap money”, get off the fence if you’ve been waiting and plunge in (or if you are already a homeowner, consider refinancing or purchasing investment property).

I believe that the last time mortgages were this inexpensive was in the very early 1960s or late 50s.   (I recall my grandfather having a VA loan from the late 50s or early 60s that was in the fours.) But you don’t have to take my word for it.  Please have a look at this historical mortgage interest chart – scroll to the very bottom of the page.

These incredibly affordable rates are, in my opinion, very likely a “once in a lifetime” opportunity for home buying.  Today I had a look at the average interest rates for mortgages each year going back to 1972 on the FreddieMac site. At the right, please find the average interest rate for each year, and the average points paid.  This year isn’t over but I’m ballparking us at 4.5% (though as of right now, rates are even lower than that at 4.35% and less than one point).

At the risk of sounding old and self-focused, I want to add that when Jim and I bought our first house in 1989, we got a loan at 10.25% and paid 2 points to get it that low. We were ecstatic when a few years later we could refinance all the way in the 8s!  The 7s seemed impossible and when it got into the 6s and 5s, who could believe it!

Right now I have home buyer clients with 20% down who are getting a 30 year fixed mortgage for about 4.25% and 1 point.  Incredible.

Home buyers often focus on the price of the home to decide affordability. But the truth is that when you purchase real estate, unless you buy “all cash” you are buying two things, not one: you are buying a house or condo and you are also buying a loan product. It is important to consider the cost of BOTH.