Interest Rate vs. Purchasing Power

BUYERS - TAKE ADVANTAGE OF CURRENT INTEREST RATES
Many buyers get discouraged when they see mortgage interest rates go up and stop looking to buy. Others fail to act when interest rates are low in the hope that market prices come further down. This is often a mistake, because the drop in demand many times creates opportunities to negotiate with lenders and sellers to compete for your business. Buyers need to know:
A) How they can keep their costs down to compensate for higher interest rates; and
B) It is almost impossible to buy at the very bottom of the market (similar to trying to pick the bottom of the stock market).
The first area you can save on with skillful negotiation is the purchase price. Less demand equals more anxious sellers, which gives buyers a much better chance to negotiate on price, terms and conditions.
Another way to lower costs is to buy down the rate on your loan. A buy-down is an upfront fee that you pay to the lender in order to bring down the interest rate on your loan (permanently). In a soft market, an anxious seller may be convinced into to paying all or part of the closing costs and buy-down costs (prepaids), lowering the amount of cash you as a buyer need to close, and keeping your loan rate low.

As a buyer, don't be discouraged by the state of the real estate market or by changing interest rates--use them to your advantage!
Don't wait to buy - BUY AND THEN WAIT!