Bay Area homebuyers now have significantly more purchasing power, thanks to falling mortgage rates. Siliconvalley.com says house hunters can afford more expensive homes than just a month ago. The Federal Reserve's recent aggressive rate cut is expected to increase buyers' affordability even further.
In August, a buyer securing a median-priced Bay Area home with a 6.47% interest rate can now, with rates dropping to 6.09%, afford a home priced $51,187 higher—without increasing their monthly mortgage payment. If rates continue to fall to 5.50%, buyers could see $136,239 in additional buying power. These figures are based on a 30-year fixed-rate mortgage with a 20% down payment.
However, this extra buying power may not always lead to larger or more luxurious homes. Demand could increase if more buyers are motivated by lower mortgage rates, pushing home prices higher. In that case, buyers may need to use their increased buying power to offer more competitive prices instead of upgrading their home choice.
It's important to note that lower Fed interest rates don’t always result in immediate mortgage rate cuts. While banks often lower their mortgage rates when the Federal Reserve cuts rates, mortgage rates can sometimes move ahead of these changes. This has been the case in recent months, as the rate on a 30-year fixed-rate mortgage has dropped from a May high of 7.22%.
For homebuyers in the nine Bay Area counties, this recent rate change could lead to significant savings on their monthly mortgage payments or allow them to stretch their dollar further. If you're looking to buy a home, now may be the time to capitalize on these historically low mortgage rates.
Source: Siliconvalley.com
