Affordability (Price vs Rate)

Definition: Affordability – A buyer needs to determine what they can afford to spend on a monthly basis versus deciding what price home they want to purchase. San Antonio home values are very stable in comparison to the rest of the Nation. As of writing there are over 11,000 homes for sale in San Antonio with between 8-10 percent being sold every month. Additionally, there are over 1,600 homes for rent in San Antonio with approximately 50 percent being rented monthly.

So do you wait and continue renting or do you purchase now before interest rates go up? Let’s look at an example:

If you can ONLY afford a monthly principal plus interest payment of $537, at 5% with a 30 year fixed mortgage you could afford a $100,000 home. If next week the interest rate went up by 0.25% (5.25%) and the following week it went up another 0.25% (5.5%); the value of the house you could purchase would decrease to $97,214 and then to $94,546, respectively.

Let’s say you want to wait and allow the price to drop to $95,000. If it did your payments would also drop to $510 per month. However, interest rates are more volatile than house prices in San Antonio. If the interest rate goes up by 0.5% (5.5%) then the payments would be $568 per month. IF the rate increases 0.5% but the price drops $5,000, then the payments would be $539 per month. You will still pay more on a monthly basis!

Complete the information below to see how interest rates affect your monthly payments and the value of the house.