This is something I have expecting and posting about on this blog for some time now.  From the Associated Press:  "The average rate on a 30-year fixed rate mortgage was 5.21 percent this week, up from 5.08 percent a week earlier, Freddie Mac said Thursday. That's the highest since mid-August, when the average rate was 5.29 percent."

According to a lender I heard speak this morning, this is just the beginning.  He expects rates to be at or close to 6% by the end of the year.  What does this mean for buyers?  Let's say that rates are going from 5% to 6%.  For every $100,000 financed, that is an increase in a monthly payment for principal and interest of almost $63 per month.  That may not sound like much, but it is significant for many buyers who are barely qualifying for a mortgage.

Over the last 30 days there have been 1515 single-family homes sold in the Austin area according to the MLS.  The average sold price was $244,301.  If buyers were putting 20% down, that means they financed almost $195,500.  Our 1% increase in interest rates would mean that buyers at 5% would be spending an additional $122 per month.  Buyers at high price points also lose purchasing power.  I have a client looking in the $1.5 million range.  What does this mean for him?  An additional $753 per month if he puts 20% down.  If his budget does not allow for this, he is likely to drop his price point.

What does this mean for sellers?  With some people dropping to lower price points or not being able to buy, offers may come in lower than where they are today and many homes will have fewer prospective buyers.  This may just slow home sales down when the entire country really needs sales to increase.

If you are a buyer, you may want to consider moving your time frame up if you can.