The 1%/10% Rule

In today’s market, this rule is an important one for buyers to know. As interest rates rise, purchasing power decreases. Combine that with an appreciating market and buyers who sit on the sidelines could miss out on great opportunity.

Here is what the 1%/10% rule says. For every 1% rise in interest rates, a buyer’s purchasing power decreases about 10%. If a buyer qualifies for a $500,000 home today and interest rates rise 1%, that buyer (assuming everything else remains the same) now only qualifies for a $450,000 home. Ouch.

This does not mean you should use this rule to get all of your buyers to write offers if they’re not actually ready to buy. You should use this, though, to inform your database. This is a great piece of content that can be incorporated into your marketing program.

Yes, the numbers can change a bit depending on the rate and price of homes. Talk to your preferred lender and perhaps you can partner on putting something together.

Focus on advising the people in your sphere by sharing valuable information. This strategy always leads happy clients and quality transactions.

Matt BonelliComment