With mortgage rates down to all-time lows, you can buy a lot more home for your money. Home affordability is at an all-time high.
According to last week’s Freddie Mac mortgage rate survey, the average 30-year fixed rate mortgage has dropped to 3.62% nationwide. This is down from 4.08% in March, and down from 4.60% from one year ago.
Mortgage rates are “on sale”.
Falling mortgage rates can make one of two changes to the way a San Francisco home buyer looks at properties. They can either make a given home’s monthly housing payment that much more affordable to a buyer, or they can expand that buyer’s home purchasing power to a higher, maximum price point.
Since July 2011, that maximum price point increase has been significant.
Assuming a principal + interest payment of $1,000 per month and a 30-year loan term, a category that includes 30-year fixed rate mortgages and most adjustable-rate mortgages, here’s a maximum loan size comparison of the last 12 months :
- July 2011 : A payment of $1,000 affords a maximum loan size of $197,130
- July 2012 : A payment of $1,000 affords a maximum loan size of $219,409
With an increase in maximum loan size of more than $22,000 in just 12 months, it’s no wonder that multiple-offer situations are becoming more common — today’s buyers know that low home prices and low mortgage rates are combining to make home buying more affordable than at any time in recent history.
However, the buyer-friendly environment can’t last forever.
First, home prices have started to rise nationwide. Demand for homes has outpaced home supply in many U.S. markets and that leads home prices higher. Second, low mortgage rates can’t last forever.
A recovering economy will lift mortgage rates back above 4 percent, a scenario that will hit home affordability hard.
Home-buying conditions are optimal this season. If you’re in the market for a new home, talk to your real estate agent and loan officer about maximizing your home purchasing power.