Affordability is more than price — Watch those rates.

From Matt Carter at Inman News:

The Mortgage Bankers Association forecasts a more abrupt rise in 30-year fixed-rate mortgage rates, from 5.2 percent during the first quarter to 5.7 percent in the fourth. By the final three months of 2011, the MBA expects 30-year fixed-rate mortgages will average 6.2 percent.

What does this mean if you are waiting for the mother of all recession discount sales? If you believe that a 1% bump in mortgage interest rates is in the cards, you had better be hoping for a more than 10% price reduction to go along with it. Otherwise, you will be no better off.

The California Association of Realtors put together an easy-on-the-eyes summary of the effects of the battling twins — home price and mortgage rate.

California Market Snapshot Mortgage Rates 09

The short of it is that more than price affects affordability. Duh.

CAR’s numbers assumed a 20% downpayment. What about the cash-strapped buyer? We will have to wait until early 2010 to get the real skinny on the Federal Housing Administration’s plans for tightening lending guidelines for FHA loans, but expect higher down-payments and larger up-front fees to be coming to an government insured loan near you in March.

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