The Cost of a Home Is Far More Important than the Price

The Cost of a Home Is Far More Important than the Price

Housing inventory is at an all-time low. There are39% fewerhomes for sale today than at this time last year, and buyer demand continues to set records.Zillowrecentlyreported: Newly pending sales are up 25.5% compared to the same week last year, the highest year-over-year increase in the weekly Zillow database. 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'slatestHome Price Indexreports that values have increased by 5.5% over the last year. This is great news if you're planning to sell your house; on the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. However, purchasers should realize that thepriceof a house is not as important as thecost.Let's break it down. There are several factors that influence the cost of a home. The two major ones are theprice of the homeand theinterest rateat which a buyer can borrow the funds necessary to purchase the home. Last week,Freddie Macannounced 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:That's a savings of $61 monthly, which adds up to $732 annually and $21,960 over the life of the loan. Bottom Line Even though home values have appreciated, it's a great time to buy a home because mortgage rates are at historic lows. Please call Debbie Brassel 602-309-9990, I would be honored to help you. www.phxhomesforsale.com