Purchasing Power in 2019?

Purchasing Power in 2019 causes excitement about buying a home this year

Purchasing Power in 2019?

Buying a house this year? What is your Purchasing Power? As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Are you thinking of finally ditching your landlord? Considering buying your first home or selling your starter house to move into your forever home?

There are two pieces of the real estate puzzle you need to watch carefully: interest rates & inventory.

Interest Rates

When buying a home, mortgage interest rates have been volatile. On the rise for much of 2018, they made a welcome reversal at the end of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.94% in November. Last week, the 30-year fixed rate mortgage fell to 4.62%. Despite the recent drop, interest rates are projected to reach 5% in 2019.

The interest rate you secure when buying a home greatly impacts your monthly housing costs. You need to keep an eye on how it also impacts your purchasing power.

Purchasing power is the amount of home you can afford to buy for the budget you can afford to spend.

As rates increase, the price of the house you can afford to buy will decrease. The chart below shows the impact that rising interest rates. This reflects a planned purchase of a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

Buyers Purchasing Power

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).

Inventory

A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 3.9-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 81 straight months.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last six months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, since June, inventory levels have started to increase as compared to the same time last year.

Housing Supply Year-Over-Year

This is a trend to watch as we move further into the new year. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line

If you are planning to enter the housing market, either as a buyer or a seller, make sure that you have an experienced local agent who can help you navigate the changes in mortgage interest rates and inventory.


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A seasoned marketing professional who sells real estate. His vast executive experience incorporates rock-solid strategic operations and stunning brand development. He manages both Almost Home locations. (Cape Coral, FL, and Westerly, RI). Chris has a healthy obsession with lifelong learning and skill development. As a result, he is a licensed FL & RI REALTOR®, Pricing Strategy Advisor, Accredited Staging Professional, and Real Estate Consultant. Chris is tenacious with the evolution of our distinct concierge services. Thus, his laser focus on the dynamic residential real estate market keeps us two steps ahead of the competition. Making Real Estate, Simplified.

2 thoughts on “Purchasing Power in 2019?

    1. Thanks, Robert. I couldn’t have said it better. The process can be intimidating. That’s one of the #1 concern we hear when working with new buyers and even seasoned buyers. You don’t want to work with just any agent, you want to work with an ACTIVE agent that’s been there and done that.

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