Website! thetickershow.com Twitter! http twitter.com There is no question, the overwhelming consensus is home prices affect purchasing power more than interest rates. The problem is it isn’t true.If you’re a REALTORS® it’s no doubt you’ve asked this question before: How much are you pre-appoved for? The issue is that this question is fundamentally flawed because the emphasis s placed solely on the loan amount, not the rate. Don’t blame yourself if you’re in this boat, its been an issue for some time. What Impact Does The Interest Rate Have Over at one of our favorite mortgage blogs, Dan Green goes in-depth on this, but the short answer is interest rates have a huge impact on purchasing power. As interest rates rise, which they’re going to do eventually, every 1% they rise your client loses 10.75% of their purchasing power. Let’s go over that again: 1% rate change = 10.75% change in the amount of home they can afford Although, the math does work in reverse, we don’t see rates tracking down that much further. So that is why now is the time to buy. Time For Math Class A step-by-step run down of how this is going to affect you when rates turn goes like this: Buyer contacts you looking for a home. You tell them to get pre-approved. Buyer gets pre-approved for $600000. In the time it took y’all to find the Buyer’s dream home, rates rose by 1%. You send the contract to the lender only to find out the Buyer only qualifies for $535000 now. It Doesn’t Matter This scenario will play … …

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Home Affordability Is Driven By Mortgage Rates, Not Home Price