Home Buying Power at Lower Interest Rates
I was at an Austin MLS Lake South property tour this morning at The Grille at Rough Hollow. A home builder’s sales person was passing out graphs illustrating the change in home affordability at lower interest rates.
Her example illustrated the difference in home affordability versus in the past when mortgage interest rates were higher. What was illustrated was that with today’s rates being less than 4%, a buyer could buy a house $27,000 more expensive than when rates were at just under 7%.
Let’s look at an example:
A couple was looking at a $200,000 home when rates were at 6.5%. If they put 20% down, the monthly principal and interest (P&I) payment would have been $867.
If that couple is looking now, when rates are so very low, let’s see what they could afford using a rate of 4%. Putting down 20%, P&I will be the same $867 if they spend around $265,000 for a house. That 2.5% decrease in interest rates will let the same buyer buy a house that is 32.5% more expensive than when rates were 6.5%. That is pretty incredible. Imaging how much house can be bought for $265,000.
Will rates to stay this low for very long? I can’t say for sure, but I doubt it. Do home buyers expect the price of a home to drop 32.5% Not in Austin. In my last If you do the math, for every $100,000 financed, a buyer can qualify for over 13% more for every 1% drop in rates.
Time to buy? If it is, call me at 512-293-2422. Or visit my search Austin homes page to look at Austin homes for sale.
Update later in the month - I'm amazed that this post had almost 2500 views in just a few days after posting it.
