Unfortunately, the term “crisis” is used in this title because it has been used in other news headlines nationally. Naturally, the issue with rising home values is that it will cost a buyer more on their initial purchase and with their monthly mortgage payments moving forward. Yes, having to pay more to purchase a home will lead to a higher downpayment and monthly mortgage amounts, but let’s not lose sight of the massive opportunity that still exists for buyers in this market… the interest rate.
Currently, at a national level the mortgage interest rate is at its all-time lowest rate… ever… in history… it’s never been lower. Wanted to make sure that point was emphasized! Locally, in the Rochester, NY market, as a buyer you have the opportunity right now to capitalize on an interest rate anywhere in the high 2% to low 3% range, depending on the strength of your financial profile. To put this in perspective, many would say that in general around a 5-6% mortgage interest rate creates an affordable dynamic for homeownership, historically speaking. If you want to know what the opposite end of the historical spectrum is, in the early 1980’s interest rates spiked to reach their peak at around 16% - that is not a typo!
TIP: Test It Yourself. If you are thinking that you will be in the market to purchase a new home anytime in the next few years, you are going to want to play around with a mortgage calculator, or better yet consult with a local lender or realtor, and run numbers at your desired price range for purchasing a home. Look at your monthly payment amounts at 3%, and then run it at 4%, and then run it at 5%. Now multiply the difference by 12 (months in a year) and then by 15 or 30 (depending on which mortgage term length you would want to get). See where this is headed?
Yes, the rising pricing in other markets bigger than Rochester, NY is an issue. There are examples where pricing has increased by more than six figures over the course of one year in a lot of markets nationally, and that is not good and certainly can create an “affordability crisis”. However, our market in Rochester is cheap in comparison. Our average price point is well below $200k, and yes our pricing has gone up dramatically in recent years, but the buy-in has to be that this market will remain stable for the long term. Don’t miss out on the opportunity that there still is to buy even with pricing on the rise here in this super affordable market.
For more info on the Real Estate Affordibility Crisis check out the newest Real Estate Show:
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