How Current Interest Rates Give You More Home Buying Power

Dated: 02/21/2020

Views: 210

The #1 Misconception in the Homebuying Process | MyKCM

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

 “A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”

CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

  • 21 states appreciating 5% or more
  • 26 states appreciating between 3-5%
  • Only 3 states appreciating less than 3%

The Misconception

Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

 “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

Bottom Line

If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

“Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

Buying or selling, I'm here to serve you. Call or text me at (928) 277-8685, or connect on any of these social media sites and put me to work for you!

         

Ben Zallaha

Realtor GRI, ABR

Realty ONE Group Mountain Desert

www.bensellsprescott.com

(928) 277-8685

How can I serve you?

Blog author image

Ben Zallaha

An Arizona native, I have always had a heart to serve. Starting with my first business at the age of 19, I have learned that sincerely helping folks and having their best interests at heart results in....

Latest Blog Posts

Prescott Real Estate Market Review - First Quarter 2020

Hello everyone! First I hope everyone is staying home as much as possible and staying as safe as possible. Take precautions and take care of yourself and your family.I am still available to you for

Read More

Impact of the Coronavirus on the U.S. Housing Market

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect

Read More

Top 5 Home Design Trends for a New Decade

Whether you’re planning a simple refresh or a full-scale renovation, it’s important to stay up to date on the latest trends in home design. Sellers who make tasteful updates can generate

Read More

How Current Interest Rates Give You More Home Buying Power

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a 

Read More