More Buying power today than in 2004!

January 22, 2009

More great news out last week, “Mortgage rates fell below 5% for the first time ever!”.  In fact, borrowers are being locked into rates even below 4.75.  As I write this, rates have inched up a little, but these rates are still available under the right conditions.  This is what bank CD’s and Money Market accounts were paying.

 

See completed story: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b781E33BA-96DE-40EB-86A4-A48DBE686DA1%7d&siteid=nbih

 

To add to this, I was recently comparing recent sales of our town homes in our current new neighborhood in Happy Valley; Volare.  Our current sales are of similar prices to what attached homes were selling for here in 2004!  After reading this article from MarketWatch, I started looking at what the average 30 year mortgage rate was in 2004.  It was 5.96.

 

On a loan of $250,000 at today’s 4.75 that is a Principal and interest payment of $1,304.12.  If this were in 2004, with a property of the same value and loan amount at 5.96 the Principal and Interest payment would be $1,492.45.  To have the same monthly payment today as in 2004, a home buyer could afford a loan amount of about $285,000. This means that a home buyer can buy over 12% more home today than they could have bought in 2004.

 

As the article says, “Mortgage rates could remain low at least until the summer”.  We all know that these rates cannot stay this low for very long due to the concerns over inflation.  This just illustrates another great opportunity to buy into this market.  As was illustrated last February in the Time Magazine article, “Ignore the Headlines” that I discussed in August, with a 5% increase in rates a 10% drop in price is washed away.  All rates have to do is jump back over 5%, which they will, and what little drop in value we realize this year will be negated by the increase cost of money.

There will never be an opportunity to buy into real estate like we are seeing right now.  Like Warren Buffet says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”  This is a great time to be a consumer right now.  A consumer that is willing to buck the advice from the naysayers and the headlines.

 

Those that seize these opportunities will be all the wiser in the years to come. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: