The Theory of Relativity

KrisBerg05 a.jpgThanks, Steve, for this recent e-mail (which I found funny, since you were sitting three feet away from me when you wrote it):

“I’m being asked constantly where interest rates are and are heading. Although we receive weekly updates from several of our favorite mortgage companies, I think it is important for us to see the ‘official’ info from Freddie Mac. Here it is: http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputYr.jsp

Now, from the buyer’s perspective, the approximate 1/2 point rise in rates since January means this: That $800,000 home in January will have to be a $760,000 home today to ensure the same monthly payment.  Put another way, with no increase in home prices a buyer would still realize an effective 5% increase in cost (monthly payment) over January of this year due to the higher interest rates. In a market where high prices are making it continually more difficult for buyers to afford the American Dream, even slight increases in lending rates can have a significant impact on the real estate market. Yes, rates are still at historically low levels, but all things are relative.

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