In our “bigger is better” culture, there’s an expectation that each home should be larger and grander than the last. But life changes like divorce, kids leaving for college, or even the simple
The COST Of Your Next Home Will Be LESS Than Your Parents Home Was
There is no doubt that the price of a home in most regions of the country is greater now than at any time in history. However, when we look at the cost of a home, it is cheaper to own today than it has been historically.
The Difference Between PRICE and COST
The price of a home is the dollar amount you and the seller agree to at the time of purchase. The cost of a home is the monthly expense you pay for your mortgage payment.
To accurately compare costs in different time periods, we must look at home prices, mortgage rates, and wages during each period. Home prices were less expensive years ago, but paychecks were also smaller and mortgage rates were much higher (the average mortgage interest rate in 1988 was 10.34%).
The best way to measure the COST of a home is to determine what percentage of income is necessary to buy a home at the time. That would take into account the price of the home, the mortgage interest rate and wages at the time.
Zillow just released research that examined home costs using this formula. The research compares the historic percentage of income necessary to afford a mortgage to the percentage needed today. It also revealed the cost if mortgage rates continue to rise as experts are predicting. Here is a graph of their findings*:
Rates would need to jump to 7% in order for the percentage of necessary income to be greater than historic norms.
Whether you are a homeowner considering selling your current house and moving up to the home of your dreams, or a first-time buyer trying to purchase your first home, it’s a great time to move forward.
*Assumptions in the Zillow report: Buyer puts 20% down, takes out a conforming, 30-year fixed-rate mortgage at rates prevailing at the time, earns the median household income, and is buying a median-valued home.
Derrick has been in real estate for ten years. Before embarking on a career in real estate, Derrick served his country honorably for nine years in the United States Navy supervising young aviation ele....
Latest Blog Posts
We all want to be good neighbors. But when it comes to selling your home, it’s not just about “keeping up with the Joneses.” It’s about outshining them at every opportunity!If you’re
Thanks to Marie Kondo and her hit Netflix series “Tidying Up,” home organization is a hot topic right now. Marie encourages her viewers to minimize their possessions and keep only those items