With all the talk of interest rates going up or down and who benefits and who pays, it can be confusing to know how these economic changes affect you as an individual. In real estate here's what it looks like:Let's say you have been looking at houses since this summer and at that time your bank told you that you were pre-qualified for $280,000 on a 30-year mortgage with 20% down at 4.375%. That means that you could spend up to $350,000 on a house. This would give you a monthly payment of about $1400. However, today's 30-year rate is 4.875%, a full half percentage higher than it was in August. To keep the payment the same on a 30-year mortgage at today's rates, your house budget just shrank to $329,000.
If you are the seller with the $350,000 house, it's pretty easy to connect the dots from here. Your house just dropped $21,000 in value. If you want the house to stay marketable, you would be wise to reposition the property so it gets in front of the people who can afford it, or make enough improvements to it so that it is worth the extra $21k. Chances are if your house was on the market for any length of time at $350k, it might have been a little overpriced to begin with. Time is money; don't waste any of it waiting around. If you aren't getting this information from your Realtor, find it somewhere or hire a new agent. There are hard decisions to be made in this market and those decisions should be informed.
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