These numbers are truly amazing. It makes great financial sense to purchase a home today, and here’s why. Look at the actual COST of a home right now compared to previous years.
Residential real estate values have returned to 2003 first quarter prices. That in itself, says something, but when you factor in today’s much lower mortgage rates, the case for buying a home becomes even more compelling.
In 2003, 30-year mortgage rates stood at 5.88%. Today they are 4% or less. How does that impact the actual COST of a home? On a home purchased for $500,000 with a 20% downpayment here is the difference in monthly cost:
You not only are saving $458 each month, or $5,496 a year but over the life of the loan you save $164,796. You buy the home for the same PRICE but the COST is almost $165,000 lower.
Add to this the size of today’s mortgage payment vs household incomes and you’ll be even more surprised by the findings. JP Morgan Chase did a study of incomes vs mortgage payments today and 10 years ago. They found that to get to the same mortgage payment to income ratio, home prices today would have to rise by 27%. This means that given the same income, you can qualify for a 27% larger loan.
So, while some buyers are on the fence – they forget the big picture. All the stars are aligned, the same home prices but lower rates and higher incomes. Don’t miss the boat and one day say “I remember when I could have . . .”