Because they are so low, interest rates have a greater impact on affordability than either appreciation or depreciation factors at this point. Every 1% change in interest rate impacts affordability by 11%. Here is an illustration to consider.
At 3.75% (30 year fixed) the principal and interest portion of a $200,000 is
$926.23
If the rate goes to 4.75% you can only borrow $178,000 for a principal and interest payment of $928.53
If the rate goes to 5.75% you can only borrow $159,000 for a principal and interest payment of $927.88
So you can see by these examples the absolutely incredible impact interest rates have on housing affordability! Not only can buyers afford more, but if you are planning to re-buy into the same or a similar market, you will enjoy the same buying power benefits.
Thinking twice, now? ;)
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