Buyer's Purchasing Power Decreases As Rates Rise

Real Estate Broker/Owner with American West Realty and Management 12599

Buyer's Purchasing Power Decreases As Rates Rise

How much impact will rising mortgage rates have on buyers and the real estate market?How much home can you afford? Today we're sharing a chart that helps explain. The median price of a home in Cody, Wyoming is $250,000 as of March 2018. With a mortgage rate of 3.75% the buyer would pay $1,158 for the mortgage. With a 1% increase to the mortgage rate, the same buyer would pay $1,304 a month, an increase of $146.


buyer's purchasing power graph


In general, a 1% increase in mortgage rates will reduce your buying power by around 10%. If you can afford a $250,000 home today at 4.25% then you would only be able to afford $221,000 at 5.25% and $200,000 at 6.25%.


Buyers should consider how mortgage rates impact their ability to purchase and then plan accordingly. The good news is that many sales markets have been on fire for several years with home prices becoming unaffordable for blue-collar workers. As rates rise, prices should stabilize and make homes more affordable again.


To better understand market rates, contact Nathan or Angie Gesner at American West Realty.

We love working with first-time buyers!

(307) 587-9608



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Comments (8)

Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

Yes, I think most home seekers realize it and they panically make offers started 20-30% over in winning over a bid. Unfortunately there are just few homes for sale. I imagine Facebook, Linkedin, Docu Sign and Google must have hired 150,000 high tech workers to keep up the demand. AI, ML, VR ......

I am actually hoping for some slow down as all roads are completely clugged during commuting.

Mar 23, 2018 08:53 PM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Nathan, most buyers get this now days and those who have been sitting on the fence are now jumping off and submitting offers in my market... Needless to say this could potentially lead to a balanced market Not So Bad...Endre

Mar 23, 2018 10:10 PM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Nathan. Rates are certainly low in the current market. Now is the time to act. Enjoy your day!

Mar 24, 2018 05:11 AM
Wayne Zuhl
Remax First Realty II - Cranford, NJ
The Last Name You'll Ever Need in Real Estate

Good point. It's hard to balance the best time to sell for the highest prices with the best time to buy for the lowest interest.

Mar 24, 2018 07:52 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes™- by eXp Realty - Vancouver, WA
REALTORS® in Clark County, WA

So true, for those on a tight budget, those rate increases might just keep them out of the housing market. Time to act today!  D

Mar 30, 2018 07:34 AM
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Good job on presenting the current plight new buyers are facing regarding rising interest rates and rising home prices, Nathan Gesner ... even small changes in rate can kick off a ripple effect in home affordability and price.  


Apr 09, 2018 12:07 PM
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
850-476-4494 - Pensacola, Pace or Gulf Breeze, Fl.

They were waiting for the rates to go down andnow that they are headed up guess what? 

Apr 15, 2018 04:44 AM
Robert Vegas Bob Swetz
Las Vegas, NV

Hello Nathan, your post has some great information!

I wrote a new post about reaching out to ActiveRain members that are following me at the AR network, your name showed up #94 on my list.

Have a wonderful Memorial Day 2018 ... ;o)

May 28, 2018 10:27 AM