As of Today April 7th 2010, the Mortgage Bankers Association put the national average for a 30-year fixed-rate mortgage at 5.31 percent. One week ago, it was 5.04 percent.

The question is what does this really mean for me as a San Jose CA home buyer? It’s all about affordability. For every 1 percentage point rise in rates, ( San Jose homes priced between $400,000 to $500,000 ) would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.

The rule of thumb is that every 1 percentage point increase in mortgage rates reduces a buyer’s purchasing power by about 10 percent.

For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will only get you a loan of $270,000.

The next big question is what will this do to home prices? The banks will still need to sell their San Jose foreclosure listings but their going to have to do so at a lower cost. If the once $300K home buyer still wants to purchase then they will do so at the new $270k range.

Dropping home prices might be expected but Silicon Valley Real Estate might not see a 10% decrease due to our stronger real estate market.

For detailed reports on your local area of choice send me an email or find me on Facebook.com