Actually buying Real Estate is looking better and better as the interest rates start to climb.  
Buyers are suddenly springing off the start line and racing to the signing table.   Buyers were getting a little pumped up with historically low interest rates, too many homes to choose from and a first time homebuyers credit to cush their pockets at tax time.  Well, the interest rates are starting to move.....up!  Buyers are starting to get uncomfortable with the monthly payment.  If buyers received a monthly payment quote a few weeks ago when the rates were hovering around 5%  they will learn that their buying power is decreasing with the higher interest rates. 

If you qualified for a $400,000 loan at 5% a month ago...

 $378,133 loan at  the higher interest rate of 5.5%

$358,101 loan at the higher interest rate of 6%

$339,678 loan at the higher interest rate of 6.5%

That decrease in buying power will do one of two things.  Rev up the buyers engine to sign for a home OR it will take buyers out of the market completely.

As a Realtor our clients look to us to give solid direction but we have little historical data to base our direction on right now.  The public does have an understanding of cyclical markets, but we do not have a crystal ball to determine when is the right time to buy.  Interest rates could very well go to 6% and beyond.  Historically, 6% is an amazing rate, however, once a buyer has seen the magical 4.75% rate it is hard to swallow a 6% rate.

If you are a home buyer, check with your lender weekly to re-evaluate your buying power.  Ask your lender the following questions: 1) how much it will cost, if anything, to lock your rate.  2) how much will it cost to relock your rate if interest rates decline  3) how is the current interest rate affecting your quoted monthly payment from last week?  4) what will your monthly payment look like at a higher interest rate?  

The greater understanding of interest rates and how they affect monthly payment will arm a buyer to make wise timing decisions.  A buyer cannot rely on a lender to call them every time the interest rates shift as the rates are in constant fluctuation.  A buyer needs to have this information up front before starting to search for a home with a Realtor. 

What is the latest in King County?  Home inventory is stabilizing or declining in some areas.  New Construction inventory is decreasing or stabilizing.  Some sellers are pulling their homes off the market - especially those that don't really need to sell.  Interest rates are going up.  The first time homebuyer tax credit expires December 1, 2009. 

Interest rates will play into the above as sellers realize their homes are more expensive now even though the price tag has not changed.  A potential buyer that viewed the house a few weeks ago may not think the home is worth a higher monthly payment due to the increased rates.  Interest rates play into a buyers decision on home affordability and desirability. 

The question remains....does a buyer buy or does a buyer walk?