Prospective Homeowners: Buy Now or It Could Cost You

What's Hot


5 Reasons to Shop for a Home in DecemberFamily

Shoppers Boycott Businesses Selling Trump-Branded ProductsBusiness

15 Things You Should Always Buy at a Dollar StoreMore

Giving Thanks: Why Foreigners Find America AmazingAround The House

New Email Phishing Scam Targets Amazon ShoppersMore

50 Best Gifts Under $25 for Everyone on Your ListFamily

Why Washing Your Turkey Can Make You IllFamily

Pay $2 and Get Unlimited Wendy’s Frosty Treats in 2017Family

The 7 Worst Things to Buy at a Dollar StoreMore

What the Richest 1 Percent Earns in Every StateFamily

10 Ways to Retire Earlier Than Friends on the Same SalaryGrow

The 10 Best Ways to Blow Your MoneyCredit & Debt

The 50 Hottest Toys of the Past 50 YearsFamily

30 Awesome Things to Do in RetirementCollege

Higher interest rates and higher home values could raise the monthly cost of purchasing a home significantly in many cites next year, real estate website Zillow says.

If you’ve been considering purchasing a home, the time to buy is now, or it will cost you. That’s according to real estate site Zillow, which says that mortgage rates are expected to climb over the next several years and home values are increasing as well.

“More often than not, buyers do not understand the profound effect of rising interest rates on affordability,” said Erin Lantz, vice president of mortgages at Zillow. “Many buyers associate a 1 percentage point interest rate change with a 1 percent change on a piece of clothing or the price of a car, when in fact they are very different.”

As a rule of thumb, Lantz said, a 1 percentage point increase in mortgage rates reduces affordability by 10 percent.

To demonstrate the potential impact on your pocketbook, Zillow calculated a 1 percentage point rise in interest rates on a 30-year fixed-rate mortgage on a typical home in 35 metropolitan areas, comparing your monthly mortgage payment if you bought now or waited a year. The calculation includes its projections for home prices next year.

It said, “In the San Jose/Silicon Valley area, for example, potential buyers should expect to see a monthly payment increase of more than $700 if they waited a year to buy the same home they were considering today. By contrast, in St. Louis, the difference is only $65 per month.”

Here are the numbers for some other cities on Zillow’s list:

  • San Francisco   $556 more a month.
  • Los Angeles — $478 more a month.
  • Seattle — $299 more a month.
  • New York  $201 more a month.
  • Boston — $198 more a month.
  • Portland, Ore. — $189 more a month.

Click here for a full list of the cities.

Zillow added:

Mortgage rates hit historic lows in December 2012 and have since risen modestly. It is debatable how much rates will rise over the next year, but they are projected to continue rising as the Federal Reserve Board withdraws its unconventional policies of recent years. At the very least, rates are not expected to continue falling as they have over the past 30 years. As a result, the financing costs associated with buying a home will increase, and new homebuyers will have to adjust, likely by cutting back on other expenses.

Are you a prospective homebuyer? Do you think you should buy now? Share your comments below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: 10 Strategies to Save Big Bucks on Amazon

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,764 more deals!