As you may be aware mortgage rates are on the rise which is negatively impacting home affordability.
Over the past five weeks average fixed rate home loan rates have increased by ~.50%. Many analysts think that rates will continue to rise for the remainder of the year.
How much does higher interest rates impact home affordability? Take a moment to watch the video below for an explanation.
A .50% increase to mortgage rates effectively translates to a +6.3% increase to home prices.
In other words, a +.50% increase to interest rates for a conventional 30-year fixed rate mortgage has the same impact on monthly payments as if interest rates were unchanged and homes were 6.3% more expensive.
If rates should increase by an additional .50% over the remainder of the year this would make homes ~12% more expensive even homes don’t appreciate as a result of the basic tenets of supply and demand.
Given that many analysts think both mortgage rates and home prices are expected to increase for the remainder of 2018 it may be significantly less affordable to buy a home in the future than it is today.
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