Home Buyers - Spend More or Pay More - Real Cap Daily #16
Home buyers are facing difficult choices right now. They must choose between higher prices or higher costs of owning. There is an old saying in real estate. “Date the rate, marry the home.” Which one is the market choosing? Which one would you choose?
Hello, my name is Dennis Maynard. I am a real estate broker in Los Angeles. Please don’t forget to like, subscribe, and follow.
Home prices recently hit all time highs. Interest rates have been at lows essentially since the 1990’s. The historical average? Around 7% compared to the 1980’s at 18%. That was the last time the Fed was fighting inflation.
As mortgage rates rise, the cost of ownership also rises. An $800,000 purchase with a $640,000 loan at 3% interest rate would have a payment of $2,698 per month excluding taxes and insurance. That same loan at 7%, $4,258 per month. That is a huge increase. And rates are only going higher.
On the flip side, this should cause homeowners to lower their prices right? Those who have to sell will. Those who don’t will not. Sellers are in an entirely different circumstance than when they were in 2008. The majority of them don’t have to sell. Who will win? Time will tell.
There is an old saying in real estate. “Date the rate, marry the home.” Rates will adjust over time. A home is a real asset that appreciates over the long term. Balancing cost and price are important. If you would like help figuring out what you home you should be looking for, please reach out.