But if you put on your hat and mittens, you can save yourself thousands of dollars and have a better chance of living where you want to.
Because I’m starting to get asked a familiar question.
“When do you think interest rates are going up?”
While this is an inquiry better put to a loan officer than a Realtor, the answer nonetheless has enormous consequences for all of my clients.
How so? Well, for every half-a-percent interest rates go up, buying power drops by $10,000.
In other words, if a buyer presently qualifies for a $200,000 mortgage, after a half-a-percent rate hike she would only be eligible for $190,000. A one percent rate hike would further reduce that to $180,000.
Those hikes would also cost the buyer an additional $5 to $10 per one thousand dollars she borrowed; every month.
How does this effect sellers?
If buyers suddenly have their home buying budgets slashed due to interest rates, they may be forced to change the types of property and neighborhoods they are considering. Ultimately, this will put downward pressure on average sale prices.
While I’m neither a loan officer nor an economist, the buzz in the real estate industry is that rates may tick up in March when the government’s $1.25 trillion program that bought mortgage backed securities expires.
While the feds have extended the program once before, indications are they will not do it again.
Call it yet another reason this may be the best year in ages to don your Carhartts and look at duplexes in January.