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Inconvenient Truth: Homes & Interest Rates

By
Real Estate Agent with Coldwell Banker Select

Let's say in 2020, you could afford a monthly mortgage payment of $1,343. At an interest rate of 3.5%, you can afford a mortgage of $300,000. Down payment and closing costs are separate.

Today, with the average mortgage rate at 6.7%(FRED), the same $1,343 monthly mortgage payment will be the payment for a mortgage of $210,000.

So, one can see that extended higher interest rates put a lot of pressure on home prices. Time will tell if this is a new normal or rates will eventually drift down. So far, the Fed rate cuts have not had the intended results as far as home affordability.

After all the Fed Funds rate is a very short term rate that the Fed sets a target rate for banks to borrow from each other over night, so it has a very indirect effect on mortgage rates.

In 2024, the stock market and Bitcoin have shown robust gains, my sense is that real estate in Tulsa has lagged but may start to catch up next year. My advice, don't try to time the market, buy and hold for the long term for nice equity gains over time!

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Comments(2)

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Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Peter - timing the real estate market seems to be a challenging strategy.  There are consequences aplenty.  

Dec 21, 2024 09:23 AM
Peter Tamura

Hi Michael,

You can time poorly or time well and it's mostly luck. Some people are lucky and luck can play a big part in outcomes in your life. However, you can overcome bad luck with persistence and trying to learn from each adversity.

Dec 21, 2024 11:42 AM
Roy Kelley
Retired - Gaithersburg, MD

This is good information to share.

One of the reasons for the low inventory in many markets is that home owners do not want to give up there low mortgage interest rate.

Jan 06, 2025 11:41 AM