Housing inventory is at an all-time low. Here in the Metro New Orleans area, there are 43.2%* fewer homes for sale today than at this time last year, but pending sales are up an amazing 43.4%*. Nationally, buyer demand continues to set records as Zillow recently reported that pending sales had the highest year-over-year increase ever.
Whenever there is a shortage in supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the real estate market right now. CoreLogic’s latest Home Price Index reports that values have increased by 5.5% over the last year.
This is great news if you’re planning to sell your house, but on the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. However, purchasers should realize that the price of a house is not as important as the cost.
Let’s break it down.
There are several factors that influence the cost of a home. The two major ones are the price of the home and the interest rate at which a buyer can borrow the funds necessary to purchase the home.
Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.87%. At this time last year, the rate was 3.73%. Let’s use an example to see how that difference impacts the true cost of a home.
Assume you purchased a home last year and took out a $250,000 mortgage. As mentioned above, home values have increased by 5.5% over the last year. To buy that same home this year, you would need to take out a mortgage of $263,750.
How will your monthly mortgage payment change based on today’s lower mortgage rate?
This table calculates the difference in your monthly payment:
Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows. When you’re ready to make a move, reach out to one of our local trusted advisors at GARDNER, REALTORS, and let us help you create the life you love!
*Copyright © Trendgraphix, Inc. via GSREIN data
Thank you to Keeping Current Matters for providing this content.