Relationship Between Real Estate Market Values Interest Rates & Property Taxes by Valerie Faltas
Everything in real estate is tied to market value market values are constantly changing. They key factor to doing anything in real estate is knowing how to calculate market value basically understand how to conduct your own appraisal. The irony is that appraisal is not generally understood even among real estate professionals. I have close friends colleagues that are experienced realtors frequently they dont understand the critical factors to determining the value of a residence. Appraisal is not difficult it simple it the key to everything in real estate whether you are purchasing a residence refinancing lowering your property taxes investing etc. Everything is in relation to the market value the irony is that real estate market values are always changing. So knowing appraisal market values is not just knowing the value of my home is X. The market is constantly changing so the key is understanding appraisal how market values are established. When you understand appraisal how market values are determined you will have the understanding necessary to work with your banks on loans your Assessor's Office on property taxes. The California Little Black Book the National Little Black Book walk you through the appraisal process step by step so that you understand how to conduct an appraisal this is tool you can use over over again. Once you have the tool the Little Black Book you can appraise an infinite number of properties know how those appraisals relate to reducing your assessment.
There is an inverse relationship between real estate market values the interest rates. When housing values are up normally the interest rates are low as opposed to when the real estate market is low the interest rates are high. During the 1990s the housing market was down the interest rates were in the double digits. I can recall when 11% was a great mortgage interest rate.
Housing values started climbing in 2001 the interest rates went down as the housing market continued to go up. What the banks make in principal they off set with lowering the interest rates inversely when the real estate values are lower this is off set by increasing interest rates. The bank makes their money one way or another this helps control inflation.
In real estate markets like today where the real estate values are dropping the interest rates are low because the Fed is trying to stimulate the economy in some way inflation increases. Our economy functions on a balance when that balance is off it creates inflation. The banks would be healthier if they could charge more in interest on the money they are loaning out. This is one of the reasons for the mortgage crisis. Higher interest rates may actually stimulate spending indirectly by offering the banks more on their money banks will be more willing to loan out more money.
Housing values interest rates off set each other so when they are both down it seems to be a good real estate market with all of the bank bankruptcies shut downs we are seeing the results. Something has to give the banks are suffering as a result the we are suffering also since not as much money is being loaned out for movement of our economy.
An inverse relationship with housing prices interest rates begs the question Is it better to buy in a high real estate market with low mortgage rates or a low housing market with high interest rates My personal opinion on this is that if you buy in a high market with low rates theres no where to go from there. your interest rate is low so it doesnt make sense to refinance so you are stuck with that large principal balance. However if you purchase a home in the midst of a low real estate market with a high interest rate then your principal balance is low you can refinance when the interest rates go down. your interest rate can change; your principal balance doesnt unless you modify your loan. Generally speaking though your principal balance is constant your interest rate is variable.
The greatest cost you will have with your property is always your note the next highest cost generally is your property taxes. The good news is that a low real estate market allows for a reduced assessment which means lower property taxes. Whether you have purchased in a high housing market or a low one you can ensure you are paying the least amount possible in property taxes In almost every state assessments are tied to market values so educating yourself on appraisal the property tax system will give you the most power in terms of lowering your property taxes. Education on how to understand market value is the key to every door pertaining to your home including lowering your property taxes assessment .
About the Author Valerie Faltas Property Tax Expert has been involved in all facets of real estate for over ten years including assessments appraisals estates trusts investing much more. She is Certified Property Tax Appraiser Licensed Residential Appraiser a member of the International Association of Assessment Officers. As a real estate investor advisor she is well versed in all aspects of real estate. to contact Valerie Faltas go to her website propertytaxlittleblackbook. com.
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