Time to Buy? YES!Stephen Larson, REALTOR®


Time is running out if you’ve been thinking about buying or selling, because of the economic situation the nation is in right now. The Federal government has been keeping interest rates low artificially now for several years (quantitative easing), but it can’t last much longer. The Federal Reserve Chairman, recently indicated that the Fed would start increasing the interest rate at which it lends money. That may mean that you may have only a short time to lock in a mortgage before interest rates go up again. Time is short.

What does this change in interest rates mean for buyers and sellers? The cost of home ownership is going to go up, big time! Here’s an example. Let’s say you can afford to spend about $1,500 per month on your mortgage (not including taxes and insurance). at today’s interest rate average of 4.1%, you qualify for a mortgage of about $310,000. The table below shows how your buying power decreases with increases in interest rates.

Interest Rate Mortgage Amount Lost Buying Power
4.5% $296,000 4.6%
5.0% $279,000 10.0%
5.5% $264,000 14.9%
6.0% $250,000 19.4%
6.5% $237,000 23.5%

The predictions for mortgage interest rates by the end of 2016 range from 4.1% to 4.7%. At 4.5% your $1,500 per month will only get you $296,000. If that happens, one year from now you will be able to afford about $16,000 less house. At 5.5%, $44,000. That’s HUGE!

For buyers, it means you get less house for your money. For sellers, it means there are fewer buyers that can pay you what your home is worth.

Now is the time to buy or sell! If you’d like more information, drop me a note or give me a call!