Monday, July 11, 2011

As Mortgage Rates Rise, Purchasing Power Falls.

What is your price range? If you've ever bought a home, no doubt your REALTOR® asked you that question, or you wondered it to yourself. It's the starting point for practically every home search in this country. The better question might be how much home have you been pre-approved to buy?

These questions serve an important purpose for buyers. First, they put boundaries on your home search, and second, they establish a price range for the homes in which you can actually afford to live.

Yet purchase price is only one of the main variables in home affordability. Another major key to home affordability is mortgage rates. A 1% Change in Your Mortgage Rate = A 10.75% Purchasing Power Change!!

In the first quarter of 2011 home affordability made all-time records. It wasn't that home prices were suddenly lower than ever before. It was that mortgage rates and home prices combined were. With each tick lower for rates, purchasing power increased. The math works in reverse, too. Rising mortgage rates harm affordability. With mortgage rates below the 30 year average they suggest now may be an opportune time to buy.

All The Best,

Herb Johnson

859-372-8019 Direct Line Email Website

Buyers and Sellers wanted. Referrals Appreciated!

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