It is cheaper to own a home today in 2011 than it was in 2003!
When I talk about the cost to own a home, I am referring to the payment you make monthly to the bank. Not many people remember the price they paid for their last automobile but everybody knows the monthly payment (cost). For this illustration, I am considering principle and interest on a $250,000 loan. In 2003, just as the real estate bubble was building, prices were starting to climb but were manageable. Interest was affordable at 5.88% so a median priced home cost the owner $1,478.84 per month.
Fast forward to 2011, home prices have settled to 2003 levels but the interest rate has hit an historic low at 4.00%. Now the payment on this same home is $1,193.54, a savings of $285.30. If we project this over 30 years, the cost to own this home would be $102,708 less that the house purchased in 2003 and held for 30 years.
The thing to be aware of is the change in the interest rate. Every quarter of one percent of interest increase starts chipping away at cost savings. If you are thinking of making a home purchase, now is a good time because of the low interest but also because there are fewer buyers competing for the current inventory during the holiday season. Waiting till the first of next year may be too late to realize these savings.
Chart courtesy of KCM Blog.
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John Alesi - REALTOR®
949-510-2154
CENTURY 21 Superstars
Search for homes at: www.YourOCHome.com
DRE# 01730187
Copyright 2011 by John Alesi. May not be copied with out consent.
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