Here is another great article explaining how mortgage interest rates effect buying power. 

If a household could afford a monthly payment of $3,000 and the mortgage rate they can get is 5.5%, the purchase price, working backward, would be $660,500, based on normal lending assumptions like a 20% down payment, etc.

I then looked at the effect that various changes in rates would have on the price. If the mortgage rate increased to 6.0% and the family’s payment budget remained at $3,000 per month, the computed purchase price would decrease to $625,500. In other words, a 0.5% increase in the mortgage rate would diminish purchasing power by $35,000. When I went in the opposite direction and lowered the borrowing rate by 0.5%, to 5.0%, buying power rose by $38,000, to just under $700,000.

If the interest rate went up .5%, then the sales price would have to decrease by 5% to have the same mortgage payment.   Our prediction for 2008 is to be flat with our sales price.  Since mortgage rates appear to beheading a little lower (already extremely low) this would be a great time to buy.  This is another reason I say you should look at interest rates just as closely as prices. 

If you would like a great lender to speak to or would like to get Pre-Qualified or Pre-Approved, contact me and I can put you in touch with the best.