Bloomberg news reported on August 2, 2012 that interest rates rose off historic lows for the first time in 7 weeks. Will this be a trend, or an anomoly? Interest rates should remain low (though probably not historically low) through the presidential election. What buyers need to understand is that rising interest rates erode your buying power just as rising prices do. If you are thinking of buying and trying to time the market bottom (which many people think we have already hit) don't forget to consider interest rates in your calculations. Let's look at a few examples as to the effect of interest rates on mortgages, for these examples we will assume a loan balance of $300,000 and a term of 30 years:
Int. Rate Payment
3% $1264.81
4% $ 1432.25
5% $ 1610.46
6% $ 1798.65
7% $ 1995.91
8% $ 2201.29

You should get the picture by now. I know a few of you doubt that interest rates will rise very much, you have short memories.:
Date Int Rate
04/86 9.99
04/90 10.44
04/95 8.53
04/00 8.29
04/05 6.03
04/10 5.41
04/12 4.23

Current interest rates are roughly half the norm over the last 26 years. This is a great time to be a buyer even if many buyers still don't realize it. If you are looking for a signal, the recent increase in prices and interest rates should be what gets hesitant buyers off the fence. For sellers pricing properly is even more important with the erosion of buying power due to the rise in interest rates. You can sell your home succesfully in this market, but you need a good agent that understands the market and marketing.

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