Lower Mortgage Rates = More affordable homes...Right?
Today I was reviewing recent sales from 2020 within a particular neighborhood. There were 10 homes that I identified (within a half mile of each other) that sold, and 50% of them sold at or over their asking price. The homes that sold at or above list price were on the market for less than 10 days before they were under contract, while the homes that sold for less than the asking price were on the market for 13 days or more (except for 1). There were two homes that were sold for the listed price, while the other 3 ranged from $1,250 to $17,000 over the listed value. These homes weren’t under-priced when listed, there is just so much competition for quality homes that are move in ready condition. The other homes that were on the market longer didn’t fair as well because of fewer upgrades to the home. Interesting.
Then the other day I heard a statement saying that because mortgage rates are getting lower, people are able to buy “more home”, essentially meaning they’re able to buy a more expensive home while keeping their monthly mortgage payment at the same rate or lower than a year ago. At first, that sounded great, however I had to figure out whether the increase in the home values would eradicate any savings from the mortgage rates. My thought was that people are actually buying the same house as they could last year, except the home is more expensive. Come to find out that there was a small margin where buyers could “afford” more home, providing they were getting these exceptionally low rates (which are mostly available for those people with immaculate credit). All this to say, please talk with a LOCAL lender and a LOCAL Realtor to help you get prepared for taking the step into home ownership. There is a fine line that could change your financial health, and even an extra .5% on your rates could really change what you can afford.
If you have any questions please reach out and we can walk through the math together. If you or know of anyone who is interested in buying or selling a home, let’s talk about setting realistic expectations to set you and your family up for success.