Hello and Happy Friday. So the market right now is kind of wonky, as we all know, and rates are going up with price points coming down. And many buyers are opting to sit on the sidelines and wait to see what happens with property values. 

So I just want to go over some of that math so that when you’re talking to buyers, you can help them see the decision-making, not just how it feels and sounds.

So for every half percent, an interest rate equals about 4% of purchase power. So put that in common numbers. A buyer pre-approved up to 900,000, at the estimated rate of 6%, purchasing power will come down by $35,000 if the interest rate goes up to 6.5%.

If the rate goes up to 7% in that same scenario, their purchase power goes from 900,000 to 830,000. So although the buyer may think an 830,000 house is cheaper than a 900 house, the reality is that their monthly payment and cash to close are identical in both scenarios.

So the house costs them the same amount over the life of the loan in either option. And so really right now, as we know, is the time to jump in, when negotiations can happen with the seller, and there’s time for the inspection and all of that versus waiting for what people wanted, you know the time the bottom of the market or something like that when everyone else will be right back in the feeding frenzy, and we’ll be back to multiple offers. So I hope this helps you in talking with buyers. I’m always happy to help to run these numbers for a specific scenario.