You have probably heard that interest rates are on the rise, but how does that actually affect the average homebuyer? In this video, realtor Jeremy Mchone discusses how the increase in interest rates has impacted affordability here in San Diego.

You've probably heard that interest rates are rising, but what does that mean? I'm Jeremy McHone with the Whissel Realty group. Let's talk about what interest rates are doing right now. You've probably heard interest rates are rising. At the beginning of the year, they were right around 4%, even a little under, and now that they've come up, they're around 5%. So they've increased a full percentage in just the last few months.

What does that look like? Well, the average home in San Diego is $825,000. Assuming you put 20% down, if the rate moved from 4% to 5%, that equates to a difference in monthly payment of $392. So almost $400 per month. If rates on that same house go from 5% then to 6%, the monthly payment will increase another $414 per month. So that means if rates go up to 6% this year, the cost for the same home will have moved $800 per month. So what does that mean for you? That means that affordability is going down very quickly. As rates rise, it's getting more and more expensive to buy a home.

So what should you do? If you're considering buying a home and you can afford to buy a home, my recommendation is to do it right now. Do it as soon as possible because rates are expected to continue to rise and we've seen what happens to affordability as those rates increase. And if rates happen to drop instead of rise, that means that you can always refinance and lock in that new rate and lock in that new payment. What if you're a homeowner and you're thinking about selling, what does this mean for you? As rates rise, less people are going to be able to afford your property at that price.

Now, does that mean that prices will decrease? Not necessarily because right now a lot of homes are getting eight to 10 offers. So even if half those buyers drop out of the market, that same home's still going to get four or five offers, which is going to continue to push prices up. In fact, as rates have gone up over the course of this year, we've seen prices continue to go up as well and prices haven't taken a hit just yet. If you're thinking about selling and you're going to be buying another property, you may want to do it sooner rather than later because when you buy that new property, you're going to be stuck with that higher rate. Now the one move I don't recommend in this environment is selling your house and moving into a rental because rates are going up, prices are going up, but we also know that rental rates are going up very quickly in San Diego.

So if you sell your home, yeah, you'll put a lot of money in your pocket, but if you move into a rental, you're likely going to watch that monthly payment increase over time. And as those prices of home values increase over time, you're going to be missing out on that also. If you have questions about interest rates or how this might affect you, or if now's the right time to buy or sell, drop a comment below I'm happy to discuss with you.