As Heather Barr over at The Phoenix Real Estate Agents points out, there’s not a lot of “down” left in interest rates.

In my opinion, the bigger risk to potential home buyers right now isn’t that home prices will fall in the future if they buy now but that interest rates will rise in the future if they wait to buy and then their monthly payment will buy less home.

The rule of thumb is that a 1% increase in interest rates lowers the amount of home you can buy by about 10%.

  • 4.80% 30-year mortgage with $1,049/month payment = $200,000 home
  • 5.80% 30-year mortgage with $1,049/month payment = $178,837 home
  • 6.80% 30-year mortgage with $1,049/month payment = $160,595 home
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