1% Increase In Mortgage Rates Reduces Buying Power By 10%

Hopefully this will put into perspective the important role of historically low interest rates.  No one can predict what home prices will do but what we do know is that rates are still at historic lows.  Yes, I said this when interest rates were in the low 5%’s and high 4%’s but guess what?  They were at historic lows and now those buyers can look at refinancing into the even lower rates now.  You can’t time a bottom with anything and this just proves.  Even if you can’t refinance or don’t want to pay closing costs again to get the lower 4%’s you still have a historically low interest rate. 

Time Magazine just had an article about reconsidering home ownership but that’s because it’s not for everyone and not everyone should own a home.  The problem was almost everyone did and was able to.  That has changed. 

Here’s another article from Time Magazine from back in 1992 http://www.time.com/time/magazine/article/0,9171,976602,00.html.  It’s pretty crazy how identical it is to what we are going through now.  I started reading it and didn’t realize it was from 1992, I thought it was written recently.  If you bought a home back in 1992 when everyone was afraid because they were experiencing something similar today you got a nice return on your money and you have equity if you didn’t use your home as an ATM.

There are many things you need to csider before buying a home.  You need to make sure you plan on staying in the home or owning it for close to 10 years and you can’t view it as an investment but as a lifestyle.  This home is for you and your family.  You need to look out long term and determine if you think you will still be at your job in 5-10 years, can you afford the additional costs of owning a home, etc. 

This isn’t meant as a sales pitch to get you to buy a home.  It’s to explain to you how important these low interest rates are.