The real estate market has been on the move. In the Folsom and El Dorado Hills market we have seen prices rise by roughly $30 per sq/ft year over year. That 2,000 sq foot home selling for $400,000 in the spring of 2012, is now going for $460,000 just one year later! (insert sellers smiling here)
So when will interest rates make there move up as well?
The truthful answer is we just don’t know. When they do begin to climb they will steal purchasing power from buyers. It’s important that sellers understand that this will lower the number of buyers that can qualify to buy their home. Unless wages begin rising, your home will become less affordable to the average home buyer.
For example. A buyer purchasing a $500,000 home putting 20% down will get a $400,000 first mortgage. Here is what different rates will do to a monthly payment. (principle and interest only)
Rate 3.5% / Monthly Payment $1,796 (rates were here until just the last few weeks of May)
Rate 4.0% / Monthly Payment $1,909 (this is roughly the current rate as of 6/4/13)
Rate 4.5% / Monthly Payment $2,026
Rate 5.0% / Monthly Payment $2,147
Rate 5.5% / Monthly Payment $2,271
Rate 6.0% / Monthly Payment $2,398