Low Interest Rates: Going ... Going ...

June is such an exciting time with end of school, graduations, start of summer, Father’s Day (don’t forget!) and so much more. It’s also prime time in our annual real estate cycle, with homes changing ownership as quickly as inventory will allow. We’ve discussed many times how our historically low interest rates are providing buyers with unprecedented purchasing power. Perhaps some have become complacent thinking these rates are the new norm. Well everything changes, and nothing stays the same, and that certainly goes for interest rates as we’re beginning to see the smallest inklings of increases as the economy continues to stabilize. So the question is, what is the impact of rising rates?
 
Experts project that nationwide, homes will appreciate about 5 percent in 2013. We’ve seen increases far greater than that already in our local housing market. They also project that interest rates will increase to about 4 percent in the same timeframe. Still historically low, but off the rock bottom rates of about 3.5 percent we’ve seen in recent months. So what does that mean for homebuyers?

If you have a loan of $500k, the difference between a loan at 3.5 percent and 4 percent is projected to be about $261, or more than $3100/year for the life of your loan. WIth a loan of $1 million, your monthly increase is about $522, or more than $6260/year for the life of your loan. A small increase in interest rates may make a significant difference!

You've heard me say many times that the price of the home, especially if it's one that you anticipate staying in for a longer timeframe, becomes less relevant than do the monthly payments and how they fit in your overall budget. These numbers show that to be particularly true. No one has a crystal ball to predict what housing prices may do in the future. But we do have the power to lock ourselves in to 30 years of monthly payments that work for us. It's in our control to take advantage of low interest rates while they are available. So why risk waiting and missing out? 

For more information on current interest rates, available homes, and all things real estate, just give me a call! I'm ready to help you in any way that I can!