Friday's Wall Street Journal was the one to reed if you were interested in the the next days' comentary about why the rates didn't go up and when might they? Economists vary as to why the rates have not gone up as of yet, but most agree that they will go up soon.
Every Tuesday morning I get together with a group of outstanding agents interested in learning more, being more efficient and most importantly, serving our clients better. Generally we discuss in depth the process of real estate from every angle you can imagine. This quarter we are focused in on the buyer process and this morning we talked about the importance of beginning the process with lender approval and the 1% - 10% rule. What is this?
A: Every 1% change in interest rate affects your buying power 10%.
So, if you are able to get a 4.5% 30 year loan today and are able to afford about $1000.00 a month on your payment you can afford to buy about $200,000.00 worth of home. Therefore we might look at houses between $180 and $205,000.00 let's say. But, if that rate were to go up say by just 1%, in order to afford this same monthly payment, you now can only afford a house at about $178k. If the rate goes up 2% that drops even more to $160K about.
Given today's market of low supply and high demand, and the immediate short term forecast of continued increasing prices at a time when the Fed is considering rate increases, you can quickly see how crucial it is to get in and buy now. That is if you plan to buy between now and say the next year or so. If your going to buy anyway, buy now to get more house for your buck! And for sellers: put it on the market now with excellent odds of selling, the pool of buyers is terrific right now in our local economy, but the rate increase could dampen spirits quickly.