By Camilo Ramirez
One of the most important life goals for millennials across the country is home ownership. They crave a sense of community and a place where they truly belong. However, affordability plays a large role in purchasing a property and when it comes to affordability, nothing is more important than interest rates. With rates currently hovering around a five-year low, now is the ideal time for millennials to become home owners.
Here’s an example of how interest rates affect affordability: In 1985 when the interest rate was 11.50%, for someone who had a budget of $1,000 per month for mortgage payment, he or she could only afford a purchase price of $100,500. In 2000, with the interest rate at 7.54%, that same person could now afford $142,000. Today, with the current interest rate hovering around 4%, a buyer with this same budget can afford a $209,000 home.
This is an eye opener for first-time, millennial buyers who are typically on the fence about whether they should purchase a home or continue to rent. The answer, with today’s interest rate, is absolutely buy. And, if a prospective millennial client needs more convincing, here’s more: Each time interest rates increase, affordability decreases. So, with the Federal Reserve eyeing another hike in the rate, millennial buyers shouldn’t wait another day to purchase a home in order to maximize the value of what they can afford.
CAMILO RAMIREZ is an agent with Berkshire Hathaway HomeServices Florida Network Realty in Jacksonville, FL and a member of the national REthink Council. You can email him at Camilo.Ramirez@FloridaNetworkRealty.com.
Respond to Interest Rates and Affordability: What You Need to Know