Home sales here in Ocala have really picked up in 2009. That’s because prices have dropped so much. The median home price here in Marion County went down 16% in 2008 and much more in some sub divisions. The other factor in affordable homes besides just price is interest rates. Interest rates are the subject of this post.Seeing our elected leaders have proposed record deficit spending, are higher interest rates inevitable? The government finances it’s spending not by printing money but by selling bonds. The higher our deficit the more we have to sell and the only way to increase the sales of bonds is to increase the interest rates that they pay.

Can the increase in interest rates wipe out the gains in affordable housing created by lower home prices?

A $100,000.00 mortgage at the current rate of 5.5% would be $568.00 a month.

If rates shoot up to 7.5% the monthly payment would be $700.00 a month.

A $125,000.00 mortgage at 5.5% is only $710.00 a month.

I hope you can see how just 2% interest can wipe out such a big chunk of buying power. Interest rates are at historical low and there is no where to go but up. I think we are at a sweet spot in the market that just can’t last forever, low rates and low prices. This is the time to buy and I mean right now.