Do Interest Rates Have The Biggest Effect On Affordability ?

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Real Estate Agent with Allison James Elite CA. BRE 01501699

Chris B Johnson, REALTOR®, SFR®, CDPE®, CHS®

One of the most important life goals for millennials across the country is home ownership. They crave a sense of community and a place where they truly belong. However, affordability plays a large role in purchasing a property and when it comes to affordability, nothing is more important than interest rates. With rates currently hovering around a five-year low, now is the ideal time for millennials to become home owners.

Here’s an example of how interest rates affect affordability: In 1985 when the interest rate was 11.50%, for someone who had a budget of $1,000 per month for mortgage payment, he or she could only afford a purchase price of $100,500. In 2000, with the interest rate at 7.54%, that same person could now afford $142,000. Today, with the current interest rate hovering around 4%, a buyer with this same budget can afford a $209,000 home.

This is an eye opener for first-time, millennial buyers who are typically on the fence about whether they should purchase a home or continue to rent. The answer, with today’s interest rate, is absolutely buy. And, if a prospective millennial client needs more convincing, here’s more: Each time interest rates increase, affordability decreases. So, with the Federal Reserve eyeing another hike in the rate, millennial buyers shouldn’t wait another day to purchase a home in order to maximize the value of what they can afford.

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Rainmaker
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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Chris. It is indeed a good time to buy if you are in a buying mood! Some, due to location and price, will continue to rent. Enjoy your day!

Mar 29, 2016 08:42 PM #1
Rainmaker
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Chris B Johnson REALTOR®
Allison James Elite - Moorpark, CA
5 Star Rated REALTOR® Quality, Not Quantity

Thank you Wayne Martin !

Mar 30, 2016 01:10 AM #2
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Rainmaker
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