Last week the U.S. Treasury stopped buying mortgage-backed securities. A program that kept interest rates below 5% for much of last year. This gave some people the opportunity to re-finance their mortgages, to get out of adjustable rate mortgages and into 30-year fixed-rate mortgages. By ending the program, we saw an immediate increase of .27 of a percent, from 5.04% to 5.31% on 30-year fixed-rate mortgages.
At issue now is the affordability factor and the decrease in purchasing power. A $300,000 mortgage last week would have cost you $1,617.81 per month. Today that same mortgage will now cost you $1,667.78 per month. But wait there is more...interest rates are expected to rise through out the year, perhaps to 6%, at which your mortgage will cost you $1,798.65 per month. If you consult your mortgage calculator you will see that a $270,000 loan at 6% will cost you $1.618.79 a month, a 10% decrease in purchasing power.
Home prices may still be decreasing, but in some areas, prices are starting to stabilize. I believe the interest rate increase could be a wake-up call to many folks who wanted to buy, but were nervous about buying a home because of price declines. I think this will be the last call for the buyers market. For some owning a home will become a lost opportunity. Prices may even decline a little bit, but for the most part prices will stabilize. The opportunity to buy at near bottom is here, especially if you plan on staying in the home for several years. Like all cycles this will end, and at this point in time, it's more likely to end sooner than later.
At issue now is the affordability factor and the decrease in purchasing power. A $300,000 mortgage last week would have cost you $1,617.81 per month. Today that same mortgage will now cost you $1,667.78 per month. But wait there is more...interest rates are expected to rise through out the year, perhaps to 6%, at which your mortgage will cost you $1,798.65 per month. If you consult your mortgage calculator you will see that a $270,000 loan at 6% will cost you $1.618.79 a month, a 10% decrease in purchasing power.
Home prices may still be decreasing, but in some areas, prices are starting to stabilize. I believe the interest rate increase could be a wake-up call to many folks who wanted to buy, but were nervous about buying a home because of price declines. I think this will be the last call for the buyers market. For some owning a home will become a lost opportunity. Prices may even decline a little bit, but for the most part prices will stabilize. The opportunity to buy at near bottom is here, especially if you plan on staying in the home for several years. Like all cycles this will end, and at this point in time, it's more likely to end sooner than later.
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