You Think Now is a Good Time to Buy That House Because Rates Are So Low -- Well, You Better Think Again!

Realtors love to claim that today's low interest rate environment is the best time to purchase your dream home. Well, I contend that propaganda from realtors will lead directly to your next nightmare.  So here is the economic reality from Wells Fargo, in which the national average 30-year Fixed Mortgage has gone from 3.40% on May 1, 2013 to 4.875%, as of today.  The matching affordability collapse (See the following graph.) has gone from $450,000 to $375,000, or a 16% equilibrium price drop in under two months! 

 

What this graph definitely illustrates, absent an increase in disposable income, is the average home affordability plunges as rates go up; and, of course, the value of your home declines!