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4.5% Interest Rates Hurt Housing

Doubt - A Despair Demotivator

In the last two weeks we've seen interest rates on 30 year fixed mortgages move from 4.5% to 5.5% (or higher) that's a big OUCH.  This full interest rate point swing has meant that almost overnight, buyers lost well over 10% of their buying power.  Another way to look at it is housing just got 10% more expensive. While everyone was thrilled to see 4.5% interest rates, myself included, from the very outset I had concern about what this means for housing long term. The short term benefits are large and … [Read more...]

Financing Costs for Twin Cities Homes – A Different View

Twin Cities Housing Finance Costs Per Square Foot - 2008

I love data... be it hard numbers, graphs, charts, tables, interpretation, etc.  I've come up with another concept of tracking overall affordability: combining cost per finished square foot with mortgage rates to give an overall cost of financing each square foot of house over the last few years (I only had data back to 2002): This chart is using approximate mortgage costs and an estimated cost per square foot for 2008 so this isn't "scientific quality" but the trend is very clear and I think it's close.  … [Read more...]

4.75% Interest Rates Possible Now!

After Tuesday's Federal Reserve interest rate cut, mortgage rates dropped more than I thought possible just two weeks ago.  I had a buyer lock in a 30 year fixed rate at 4.75%!  That is simply unbelievable... With rates having dropped from 6.25% a few months ago to 4.75% - 5% today, buyers with a loan amount of $200,000 would save up to $188 per month!  Their other option would be to"step up" their home search since this rate reduction has increased their purchasing power by a substantial $36,000 and keep the … [Read more...]

Twin Cities Housing Affordability Hits Record High

December 2008 Housing Affordability Index - Minneapolis/St. Paul

Just released from MAAR: The Housing Affordability Index (HAI)�shot up 19 points to 180 thanks to the recent healthy declines in mortgage interest rates and a continued softening in home prices; the HAI has not been this attractive since we began tracking data in 1990. What This Means to You The dramatic fall in interest rates in recent weeks coupled with the substantial sales price reductions (mostly found in lender-mediated sales, which are foreclosures and short sales) has lead to an affordability index that … [Read more...]

Twin Cities Mortgage Rates Fall

On Friday my loan officers were quoting rates on 30yr fixed mortgages in the 5.5% - 6% range again... which is down more than .5% from just a couple weeks ago.  On a $200,000 house, that means a monthly payment that is more than $80 less than it was just 2 weeks before.  Or in other terms, it would be like taking $13,000 off the price of a $200,000 home. … [Read more...]

Economy in Trouble: Bad for Stocks, Good for Housing

As the news about a slowing economy and fears of recession mount, the stock market has taken a huge hit, falling double-digit percentages in the last couple months, but housing is benefitting.  As money has been taken out of stocks, it has been flowing into bonds, which are historically a very safe investment.  When demand for bonds rises, that reduces the interest rate paid on those bonds.  As the bond market goes, the mortgage market follows. We've seen substantial improvements in rates in just the last … [Read more...]

Twin Cities Interest Rates Drop to Multi-Year Low

Over the last couple of weeks I've been seeing rates on 30-year fixed mortgages fall substantially... I've seen some recent quotes for 5.5%! When you look at a straight affordability perspective, taking 1/2% off the interest rate (which is what has happened in the last few weeks) on a $200,000 loan saves you $1000 per year in interest charges, which would be a monthly savings of $83 or is like taking nearly $14,000 off the purchase price of the house, as compared to the higher interest rate. With inventory at … [Read more...]


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This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.