Lower Interest Rates = Increased Purchasing Power

This info is time sensitive per June 2021, but the theory stands the test of time.
The message?
Low interest rates increase Buyer’s purchasing power significantly.

GOOD NEWS FOR BUYERS

Josh Lerner, economist with the Oregon Office of Economic Analysis, notes that recently high home prices have been offset by low interest rates of around 2.7%--with a negligible impact on affordability for buyers. In short, with interest rates falling 1% from late 2019 (3.7%) to all of 2020 (2.7%) , buyers were able to absorb a 13% increase in price without their monthly mortgage payments rising.

Says Lerner: "This means if a household was looking to buy a $400,000 home pre-pandemic, they could afford a $450,000 home during the pandemic. A $500,000 budget became a $565,000 budget, and so on."

SO-SO NEWS FOR BUYERS

Interest rates are ticking back up from the lows of late 2020. As of May 2021, Lerner states, rates "are settling in around 3% or so."

What does this do for Buyer purchasing power? Backs it off a bit. Right? From 2.7%, we're now at 3%. Not 3.7%, but still Buyers will feel the high prices a bit more on their monthly payments. Not at lot at this point, but some.