Here is one of the reasons for the hot market in real estate, http://www.mercurynews.com/real-estate/ci_21167877/freddie-mac-says-30-year-fixed-mortgage-plunges. These amazingly low rates, below 3.5% for 30-year fixed and as low as 2.8% for 15-year fixed are also driving a very high level of refinancing by home owners. For buyers, the key number is monthly payments and these low rates mean that they can buy more expensive homes.
To illustrate this, assume a buyer can afford a monthly loan payment of $5,000/mo for a property. At 3.5%, 30-year fixed with 20% down, this buyer could afford to buy a home that cost almost $1.4m (the monthly payment at $1.4m is $5,029). However if the interest rate was 5%, the same buyer cannot even afford a $1.2m home (where the monthly payment is $5,153). This buyer can get significantly more house for $200,000, while paying less each month and even overall.
Who wouldn't want to take advantage of these rates if they could?
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