It isn’t often you can buy more of anything for less money but in the case of houses that’s exactly what you can do. How is this possible, you ask?? It’s all about the economy. As bad as it might seem, the sad state of the economy has driven down both the prices of homes and the interest rates on mortgages. Let’s take a look at some numbers:
In 2008, interest rates for 30 year fixed mortgages were around 6%. If you wanted to buy a house for $550,000 and paid 20% down ($110,000), you’d have a mortgage amount of $440,000 with a payment (principal and interest) of $2,638 per month. If you bought that same house now for $550,000 with the same 20% down payment, you’d have the same mortgage of $440,000 but now your payment at 4% interest would only be $2,101. That’s a savings of $537 per month for the same mortgage amount!
Here’s yet another way to look at it: let’s see what a $2,500 monthly payment (again, just principal and interest) would have bought you in 2008 compared to what it would buy you now. In 2008 with interest around 6% with a 20% down payment, you could have bought a house that was selling for $521,224. If you bought a house today with 20% down at 4% interest, you could buy one that is selling for $654,566. That’s $133,342 more house for the same payment! Sound like a good deal? Well hold on, it gets even better! The house that you could buy now for $654,566 would likely have been on the market in 2008 for somewhere in the neighborhood of $900,000 to $1,000,000!!! So now you’re basically able to buy a million dollar house for the same payment that you could have bought a $500,000 house for in 2008!
I’ve said it before and I’ll probably say it a few more times: the time to buy a house is right now! And don’t let me hear you say “but I have a house to sell and they’re not selling right now”. Yes they are! Inventories are down, interest rates are down, and buyers are out there looking. This is an excellent time to sell (then go buy that million dollar house!).