Low mortgage rates were one of the single biggest reasons for the real estate boom in the last five years. Incidentally, a rise in mortgage rates of late, is also one of the main reasons for the real estate market to fizzle out from its boom recently. In this article let us try and understand what the recent news about a drop in mortgage rates means for any real estate investor.

According to industry experts, the real estate market will not be able to pick-up pace in spite of a fall in mortgage rates so fast. The number of houses that are available for sale in the US is at an all time high and with the demand not matching the supply, the market will find it difficult to wake up from its current slumber in the near future. Another sneak peek into the mortgage rate trends, in the July of 2006, mortgage rates were at 6.79% for a fixed 30-year period and in mid-October the rates slid to 6.40% for the same period. While this might seem to be a positive sign, it is a huge slump from 5.8% during October 2005. Moreover, the mortgage rates during 2003 were the lowest at 5.2%.

Mortgage rates are directly proportional to an individual’s interest payouts and thus they have a larger impact on the housing sale trends. Real estate industry experts feel that if the market needs to rise once again from the current slumber, mortgage rates need to continuously drop and reach the levels that they were during 2003.

Real estate pros recommend studying the mortgage rate trends for a longer period of time. Mortgage rates when compared year-on-year for the last 50 years indicates that the current trends are extremely low in spite of being on the rise in the last 3 years or so.

The supply of houses has gone up by about 40% as compared to last year which is another blow for the real estate market. This effect when coupled with lower interest rates is good enough reason for first time buyers to enter the market. At the same time, this scenario is also trying to convince those investors who bought a house during the early 2000s either for investment purposes or who bought their second homes to re-enter the present market. However, this is not as easy as it seems to be.

Although mortgage rates play a crucial role in the way the housing industry trends, there are many other factors that also play a similarly important role. The present housing market surplus can evaporate faster provided some of these crucial factors line up along with lower mortgage rates.