There's More To Consider Than Just The Home Price
Most potential home-buyers begin their search looking at home prices. However, there are more factors to consider than just price. You have to look at the big picture factoring in all the costs that are associates with purchasing a property. Today, the overall impact of costs to purchase are significantly affected by historic low mortgage interest rates. Because rates are at an all-time low, they are making homes more affordable now than anytime since 2016. Here's an explanation as to why this is true.
Todays interest rates are off-setting real estate home prices because it is inexpensive to borrow money. In other words, buying a home with low mortgage interest rates affords you significant savings over time throughout the loan term.
The National Association of Realtors® released the graph below. The higher the bars increase, the more affordable homes are. The orange bars show a snapshot in time when homes were the most affordable taking into account when the housing bubble occurred. We all remember distressed properties, reo foreclosures and short sales were very common and outnumbered normal arms-length transactions. In contrast, todays real estate market is nothing like the housing bubble. The green bar indicates today's market, showing homes indeed are much more affordable than they have been in years, and much more affordable than they were during the years prior to the market fall-out. The difference can be attributed to low rates driving the affordability.
Pundits Take on Affordability
Pundits are in unison that we are experiencing a historic moment in time where homes are much more affordable. Lawrence Yun, NAR's chief economist said,
“Although housing prices have consistently moved higher, when the favorable mortgage rates are factored in, an overall home purchase was more affordable in 2020’s second quarter compared to one year ago.”
Quicken Loans EVP of Capital Markets, Bill Banfield shared,
“No matter what you’re looking for, this is a great time to buy since the current low interest rates can stretch your spending power.”
As home prices here in the Fort Lauderdale real estate market have continued to rise year over year, pricing many home-buyers out of many neighborhoods, low interest rates bring those neighborhoods like Coral Ridge, Imperial Point, Poinsettia Heights, Victoria Park, and Wilton Manors back into play for many buyers. When considering a home purchase, it's important to look at the bigger picture, all the costs involved and not just the price of the home. Homes that you thought you might not be able to afford may well be in your budget. Let's connect today and see how affordability affects your purchasing power and your long-term real estate goals.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. John Sabia, Coldwell Banker and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. John Sabia, Coldwell Banker and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.