If you’re looking to buy a home, one of the key deciding factors in setting your budget or determining your overall buying power, is your mortgage interest rate. In recent months, the Federal
Understanding Buying Power in a Changing Market
Dated: July 27 2022
If you’re looking to buy a home, one of the key deciding factors in setting your budget or determining your overall buying power, is your mortgage interest rate. In recent months, the Federal Reserve has increased interest rates to curb inflation, which has left many of us wondering if that dream home is still attainable or just simply out of reach.
When interest rates increase, the cost to own a home also increases. To get a better perspective on how changes in interest rates affect buying power, I spoke with Audrey Kankelfritz, a Mortgage Consultant with Park Mortgage.
The graphic below represents a home buyer that plans to purchase a home within the local median price range while keeping principal and interest payments between $1,600 - $1,700 a month.
As you can see, with each quarter of a percent (.25%) increase in interest rate, the value of the home you can afford decreases by 6.25% (for every $25,000).
Even though we’ve seen a sharp increase, interest rates are still historically low. Just like the housing market, interest rates will continue to fluctuate. Oh, and let’s keep in mind that mortgage interest rates exceeded 18% in the early 1980s. YIKES!!
Regardless of recent changes, now is still a great time to find your dream home. The housing market has started to take a turn and the days of paying thousands of dollars over the list price with multiple competing offers are becoming less frequent. Homes are staying on the market longer and buyers are feeling more comfortable with writing offers that include contingencies and are even starting to ask for seller concessions.
As a buyer, there are many options for you to get into the home of your dreams. Both North Dakota and Minnesota have several programs available to assist first-time home buyers, helping to neutralize the wake of increased interest rates. A few of the many benefits of these programs include down payment and closing cost assistance. Reach out to your lender to discuss if you qualify for any of the expanded assistance programs available in your state.
And please, if you’re looking to sell your home, don’t be discouraged by the shifting housing market. Home values are still at record highs and inventory remains very low. Changes in the housing market do not happen overnight and market correction generally takes several months to years. Rest assured that buyers are still out there and want to make an offer on your home! Consult with your favorite REALTOR® about listing strategies and setting expectations in today’s changing housing environment.
“It’s less about the destination and more about the experiences you create and the people you touch along the way.” – Nick SwensonNick grew up on a dairy farm in rural MN. His ....
Latest Blog Posts
7 Renovations To Make Your Home Appealing to Next-Gen Buyers1. Up-to-Date KitchenGiving your kitchen a modern touch is the best way to make your home more attractive to buyers. Even simple updates