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.
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!
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