Here’s how interest rates will affect home price affordability.

What impact will rising rates have on home prices and affordability? The Federal Reserve has increased interest rates by almost 1% in the last six weeks, and they’re predicting another three to five rate hikes by the end of the year.

I pulled out my handy HP 12c and figured out that every 1% increase in rates affects your buying power by 10% to 11%. If you qualify for a $500,000 home and the interest rate goes up 1%, you now only qualify for a $447,000 home. If rates go up to 5%, you’d only qualify for $396,000. 

I think we could easily see a 2% increase in rates, which would mean a 20% decrease in your buying power. If you’ve been thinking about buying or selling in the next year or two, please give me a call. I’d love to talk strategy with you.