Are We There Yet?

The big question is - have real estate valuations hit bottom yet?  Think about it: the only way to know if we have hit bottom is once the market starts going up again!  But you can be sure that now (right now!) is the best time to buy real estate in over 40 years! 

Prices may start to climb in the near future, but if interest rates climb even slightly, that will have more of an impact on your monthly mortgage payment than a home that apprceciates 10% in selling price!

The chart shown (please view full size) dramatically illustrates the impact of lower interest rates on housing costs, and the relative affordability of housing in the United States. The cost of a loaf of bread and a gallon of gas has more than tripled since 1989, and car prices have nearly doubled. While the median price of a new home has increased by 70 percent, mortgage interest rates, which stood at 10 percent back in 1989, are less than half of what they were back then. The impact of rock-bottom interest rates is that the monthly mortgage payment on a median priced home in the United States has increased by a mere $4 since 1989.

Unless you are paying cash, the monthly payment tends to be a far more relevant number than the home’s actual purchase price. So if you are waiting for home prices to hit the floor before buying, it’s important to point out that the possibility of a slight drop in the price of a home will have very little impact on the monthly payment, while even a slight rise in interest rates (a far more likely scenario) will have a significant impact.

For any real estate questions or needs please email Catherine Richardson of Keller Williams Realty, RichardsonC@kw.com