Blessings Realty | Colorado Springs and Monument Realtor
Changing minds about Realtors
![The Impact Your Interest Rate Has on Your Buying Power [INFOGRAPHIC]](http://www.myfirstclassteam.com/wp-content/uploads/2016/12/20161216-Cost-of-Interest-STM-1024x791-1024x791.jpeg)
There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.
However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.
Here is a graph showing what actually happened:
Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All,” the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:
“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”
Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.
We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.
Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Along with Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors are all calling for mortgage rates to continue to rise over the next four quarters.
This has caused some purchasers to lament the fact they may no longer be able to get a rate less than 4%. However, we must realize that current rates are still at historic lows.
Here is a chart showing the average mortgage interest rate over the last several decades.
Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago; a lower rate than your parents did twenty years ago and a better rate than your grandparents did forty years ago.
