The S&P CoreLogic Case-Shiller home price index jumped 6.2% in September, beating the 6.1% increase expected by economists polled by Reuters.
David Blitzer, S&P Dow Jones indexes managing director, said the index is rising “at the fastest annual rate since June 2014.”
“Home prices are rising across the country for many sound reasons. We have a healthy U.S. economy and an unemployment rate at its lowest level in nearly 17 years. With wages gradually rising and mortgage rates still near historic lows, people are feeling more confident and are looking to buy homes. A tight supply of homes has also contributed to home-price increases but we see a silver lining here. As home equity grows for existing homeowners, we believe more people will list their homes, which should bring greater balance to housing inventory and the market overall.”
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.92%, which is still near record lows in comparison to recent history!
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.
Act now to get the most house for your hard-earned money.