There's been a lot of attention on mortgage interest rates and home affordability in the news lately. Basically, without all the economics jargon and mumbo jumbo, the Fed is tapering bond buying. Which means that there is not as much government money floating into the mortgage industry.
Mortgage interest rates have all ready risen 1% from the all time low, one year ago. Analysts are expecting them to raise about another 1% by the end of this year! The difference in home affordability and how it affects a new home buyer's house payment is best demonstrated with this picture.
Basically, with a one percent increase in interest rates, it decreases the affordability by ten percent. For instance, if a buyer is considering a $200,000 home today at the current interest rates, that same house payment will be about $150 more per month and the affordability will be about $20,000 less with a one percent mortgage interest rate increase. Make sense? Said another way, a buyer prequalified at $200,000 today, will be able to afford a home at $180,000 when the interest rates go up 1%.
Many buyers who are on the fence, and waiting for the prices or rates to go down need to get off the fence, put bluntly. Rates are not going to get lower than they were a year ago, and are not likely to get back to there. Home prices have all ready started to rise and there are many markets that are low on inventory, making it a seller's market, rather than the buyer's market we're used to seeing.
For more information on the impact of mortgage interest rates on house payments, or homes for sale in the Jacksonville area, give me a call! I'd love to help!
