With inventory loosening and prices slowing, buyers’ chances look promisingâ€”but as mortgage rates rise, how great are their odds, really?
According to recently released research by Zillow, home-buying power is shrinking. In the average scenario, where a buyer earns the median national pay, a buyer could have bought a $393,700 home in January of last yearâ€”assuming he or she kept their monthly mortgage payment to 30 percent of their salary. Rates were 4.15 percent at the time.
Now, rates are 4.63 percent. According to the findings, with the increase, the average budget drops to $372,000, effectively erasing $21,700. If mortgage rates were to rise to 6 percent, the average budget would sink to $319,200, or $52,800 less.
At the current rateâ€”and if a buyer keeps to the 30 percent thresholdâ€”56.5 percent of listings would be within their price range. At 6 percent, the amount falls to 48 percent.
Does this mean waiting is wise? Likely not. Budgets can be flexible, and so are housing indicators. While crunching the numbers is vital, so is considering your lifestyle and needs, says Aaron Terrazas, senior economist at Zillow.
“While it’s certainly important to keep track of home values and interest rates and plan your budget accordingly, buyers shouldn’t base their decisions on those moving targets,” Terrazas says. “A home is the most valuable asset that most people will ever own, so it’s especially important not to gamble with it. In the end, the best time to buy a home is always when the time is right for an individual buyerâ€”often when they’re financially ready, when they’re relocating to a new area or a major life event requires them to upsize or downsize.
“It’s also important to remember that rates on a typical mortgage remain very low by historic standardsâ€”especially given the type of strong economic growth we’ve been experiencing,” says Terrazas.Â
For more information, please visit www.zillow.com. Â