Is Real estate a smart investment today?
Many people are wondering how today's real estate market compares to markets of the past, and what direction it is heading. There is more and more research coming to light that purchasing a home today makes financial sense. Whether it be income to price ratios, renting versus buying, or mortgage payments and qualifications, purchasing a home right now is a bargain compared to historic norms.
Think about it like this- when is it better to go shopping for holiday presents? "Black Friday" or the day before Christmas Eve? When are the sales? When is there more inventory on the shelves? "Black Friday of course. In the same respect, Real Estate right now is ON SALE! And there is an abbundance of inventory. In the Spring prices increase, the cost of a loan will increase due to rising interest rates, and the demand is higher because there are more buyers looking in the Spring and Summer than in the Fall or Winter. It doesn't make sense to wait!
According to the most recent S&P Case Shiller price index, residential real estate values have returned to the levels of the first quarter of 2003. However, in 2003, 30 year mortgage rates were at 5.88%. Today they are at 4%. How does that impact the COST of a home? On a home purchased for $250,000, here is the difference:
In 2003 a loan of $250,000 at 5.88% interest would equal a monthly payment of $1,478.84
Today a loan of $250,000 at 4% equals a monthly payment of $1,193.54
A difference of $285.30 per month, or $3,423.60 per year and $102,708 over the life of a 30 year mortgage!!
So TODAY you can buy a home for the same PRICE as in 2003, but the COST is over $100,000 less!! And rates are only going to continue to climb over the next 6-9 months as housing prices begin to stabilize.
This is why so many financial advisors are saying that this may be one of the best times in history to purchase a home.
