made my stomach turn. Never in the history of interest rates has there been an increase of 4% in such a
short time. Never. Never ever. As a result, the housing market became a hot topic all over the media.
The sky was falling into your house if you were tuned in. Let’s break down what actually happened
versus what you heard in the media.
The first quarter of last year was a mess. If you were a buyer you had to offer to pay over appraisal and
offer your firstborn in order to go under contract. Interest rates were around 3%. For example, if you
were looking at a 600K home price with a 30-year fixed rate with 10% down your monthly payment
would be roughly $3,200.00.
The second quarter of last year was a mess. If you were a buyer you were dealing with higher interest
rates forcing your housing price point down. You were wondering why you didn’t buy a house when
interest rates were at 2.5%. Interest rates were around 5%. With that same example, if you were looking
at a 600K home price with a 30-year fixed rate with 10% down your monthly payment would be roughly
$3,800.00.
The third quarter of last year was a mess. If you were a buyer, you finally had some choices in your life.
You didn’t have to offer your children up and you could even submit a contract to the seller at a lower
price. If you were a seller, you had to clean your house before showings. Maybe even apply a new coat
of paint and fix that toilet. Interest rates were around 7%. With that same example, if you were looking
at a 600K home price with a 30-year fixed rate with 10% down your monthly payment would be roughly
$4,500.00.
The fourth quarter of last year was a mess. Buyers and sellers were both ready to give up. Rates were
still high and the holidays are always busy. Inflation was hitting hard and the chickens were infected
with avian influenza. Thankfully interest rates saw some relief around 6%. With that same example, if
you were looking at a 600K home price with a 30-year fixed rate with 10% down your monthly payment
would be roughly $4,200.00.
Please notice the change in buying power over the year. Please notice that all scenarios were a mess for
either the respective buyer or seller. The same buyer in my example would have to pay $1000.00 more a
month for the same house price. That is what interest rates do to buying power. It’s shocking going from
3-7% in the span of a few months. However, at the end of the day, 7% is still a VERY average interest
rate. At the end of the day, you still have to pay for housing. At the end of the day, investing in yourself
in real estate is still one of the most important things you can do for your financial future.
Hang on for the ride of 2023, let’s all hope we don’t experience the thrills of the interest rate ride again.
Homegrown tip: It’s that time of year again! I love perusing the new seed catalog I get every December
to see what fruits and vegetables I am going to grow in the summer. If you’d like to request a free
catalog from my favorite company just follow the link below and input your information. My absolute
favorite every year are the ground cherries, if I can snag some before Kali sees them.
Seed Savers
Senior Tip: If you still have checks older than 7 years lying around "just in case" you might need them, there is no reason not to shred them
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