Chris Brown, Orlando Mortgage Pro puts it in simple terms.. and this should alert some folks who are sitting on the fence pondering the question on whether or not to purchase now or later.
Chris equates it like this:
Numbers speak! “If you are waiting for prices to fall, here is something to think about… ”
A $250,000 house today at an interest rate of 4.375% = a monthly payment of $1248.21 PI!
That same monthly payment at an interest rate of 5.375% would only = a $222,906 loan amount.
In other words, the house would have to go down over 10% [$27,094] before the payment would be the same (at a higher int rate).
As a Realtor, my take on this is the reverse:
If you can afford a payment of $1248.21, you qualify for a purchase price of $250,000 at an interest rate of 4.375.
If the interest rate rises one point, to 5.375, the purchase price of the home you can now afford just dropped to $222,906!
$27,904 is a lot of money to walk away from if you buying a home.
If I were a home-buyer I’d think twice about waiting. Home prices in Tallahassee, FL are low, and interest rates right now are at a 40 year low. Consider a purchase now before rates rise. Rates below 5% or 6% will not last.