Higher Interest Rates, but are You Better Off Buying a Home Today?

Higher Interest Rates

Single family Homes in San Carlos are not cheap, most are selling in the $1,100-$1,400/SqFt of living space. However, prices have dropped significantly in the past few months. If we look at San Mateo County real estate, single family home prices have dropped from about $1,330/Sqft in May 2022 to about $1,100 in October 2022; that’s a 17% drop in value over 5 months. Meantime interest rates jumped from about 3% to 5.5% for a 30 year fixed loan. So, are you better off today buying your San Carlos home or back in May 2022?

From a monthly payment point of view, it’s pretty much a wash. Your monthly payments have not really changed whether you bought the home 6 months ago or today even with the higher interest rates!

Let’s look at some boring math about Higher Interest Rates

You bought the home 6 months ago for $2,500,000, put 20% down ($500,000). You got your mortgage payment at 3% interest, home insurance, and property taxes (PITI) all adding up to $11,082/month.
You buy today, the house now costs $2,100,000, you still put $500,000 down, you pay 5.5% on the loan, pay insurance, and have lower property taxes; your monthly PITI payment is $11,335/month.

Basically, the monthly payments add up to the same as 6 months ago. However, 6 months ago your interest rate would likely not go lower than 3%. Today you may at least have a chance at refinancing your loan and eventually having a lower payment than having bought the home 6 months ago. If rates went back down to 3%, your PITI payment would be only $9,000; that’s a monthly savings of $2,000. So maybe even with the higher interest rates you are better off today as a buyer for a San Carlos home!