As interest rates begin to rise buyers lose purchasing power. Here is another opportunity to educate your buyers or fence sitters to help them understand the cost of waiting. Simply stated, for every 1% interest rates rise, a buyer will lose 10% purchasing power. So with a rate of 4.25% on a 200,000 loan, the payment would be $983/month (that’s amazing on its own).
When interest rates rise to 5.25% a buyer would have to have a $180,000 loan to keep nearly the same payment. In this example at 5.25% on a $180,000 loan the payment would be $993/month. So either the buyer will have to increase their down payment by $20,000 or they have to accept a less expensive home to keep the same payment.
Check out the chart below that shows the changes in purchasing power as interest rates rise.
Cost of Waiting is 10% buying power for every 1% rate increase
The fear is that home prices are still dropping. It’s my opinion and that of many experts that they aren’t going to drop another 10% especially in Charleston, South Carolina and San Diego where we do most of our business. In fact a study just came out from Case/Schiller that shows August was the 5th straight month that home prices increased. The newest data isn’t out yet but September and October seemed to be good months as well.
At the same time most everyone in the industry agrees that interest rates will be rising soon. It could be the difference between getting the house your buyer is dreaming about and getting their 2nd or 3rd choice. This is information your buyer should have and it’s a powerful selling tool.
It doesn’t matter if you’re purchasing a vacation home in Charleston or San Diego, a first time buyer, or a seasoned investor now is a great time to buy. Low interest rates combined with low home prices are creating opportunities that we have never seen before. Give us a call for the lowest rate mortgages available anywhere. There are also great opportunities to refinance at this time. Fill out a secure application by clicking the link above.
Hometown Hero
Our Hometown Hero Program is designed to help Veterans, Active duty military, Nurses, Firefighter, Police, and other first responders in South Carolina and California realize the dream of home ownership with discounted mortgages. These individuals give so much to our communities and country. So we decided to give back.
Pass the word around your local neighborhood so these individuals know this exists. Most military of Veterans qualify for the VA loan program which is the best loan available in the country. There is a zero down payment and no PMI. The VA loan program has given so many the opportunity to own a home and combined with the Hometown Hero discounted fees, it’s even easier. Call us today or fill out a secure online application by clicking the application tab above.