The PRICE Is the Same, But the COST Is Less
Let’s put things into perspective. When you are comparing today’s real estate market to the environment in 2004 you can make dramatic headlines. When you really get down to the purchase price and making that decision on whether it’s a good time to buy our friends at Keeping Current Matters have laid it out well…The PRICE Is the Same, But the COST Is Less.
There is more and more research coming out showing that it makes great financial sense to purchase a home today . Whether it be rent vs. buy ratios, income-to-price ratios or income-to-mortgage payment ratios, purchasing a home right now is a bargain compared to historic norms. Now we want to look at the COST of a home today compared to pre-peak prices.
According to the most recent S&P Case Shiller price index, residential real estate values have returned to 2003 1Q PRICEs. That, in itself, says something. However, when you factor in mortgage rates, the case for buying a home today becomes even more compelling.
In 2003, 30 year mortgage rates stood at 5.88%. Today, they are 4%. How does that impact the actual COST of a home? On a home purchased for $250,000, here is the difference in monthly cost:
That means you save $285.30 a month, $3,423.60 a year and $102,708 over the life of a 30 year mortgage! You buy the home for the same PRICE but the COST is over $100,000 less.
Bottom Line
This is why so many financial advisors are saying that this may be one of the greatest times in history to purchase a home.
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