2022 Boise Idaho Real Estate Blog

Interest Rates, Price and Home Affordability

Main Building Value into Boise Real Estate
An analysis on how lower interest rates makes homes more affordable.

Lately there has been a lot of discussion on how the price of new homes has been climbing out of the affordability range. Trust me, there is nothing I would love more than to build the same durable energy efficient homes, but be able to price them significantly lower than what it cost me to build them. Instead of having to lower my pricing today’s low interest rates are doing it for me.    

Instead of focusing on price why don’t we focus on monthly payment? Isn’t this what buying a home really comes down to anyway? With interest rates falling to record lows a buyer could look at the increased value in two ways. 1) Purchase the same priced home they were going to when rates were higher and reduce their monthly mortgage payment. 2) Keep the same monthly interest payment they would have had when rates where higher, but purchase a higher priced more custom home.
Below is the brake down on home pricing relative to changing interest rates. It assumes a constant monthly mortgage payment of $1,200 ( w/ principle and interest, P&I) with a 5% down payment. 
Interest Rate     Home Price      
   6.00%       =    $210,700
   5.75%       =    $216,500
   5.50%       =    $222,500
   5.25%       =    $228,700
   5.00%       =    $235,300
   4.75%       =    $242,200
   4.50%       =    $249,300
It shows that as interest rates drop from 6% to 5% a buyer can now purchase a home that is about $25K more and keep the same monthly mortgage payment.  If interest rates go to 4.5% the more expensive homes truly become affordable.    
To discuss additional ways I create value in Boise real estate contact me directly, 208-867-4587 or visit us at www.flynnerhomes.com .
Scott Flynn, RMB, CGP
Posted by Scott Flynn at 12/10/2008 9:49:00 PM

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