Prices have fallen while purchasing power has continued to grow.

By
Real Estate Agent with LaBelle Real Estate Group

Back in 1981, a $1,500 per month, 30-year fixed rate loan payment would finance approximately $100,000. Over the last three decades, that figure has climbed pretty steadily. The same $1,500 may now finance over $300,000.

 

The steady rise in incomes over time has contributed to affordability. With higher earnings, a typical fixed rate loan payment has become a progressively smaller piece of the average paycheck.

 

Though increasing affordability enabled rising prices in the early 2000s, things went wrong. Some buyers started purchasing homes they could not afford. Some used loans that were manageable only as long as they could quickly "flip" for a profit, cash out or use equity loans to make the payments. Add in a good dose of speculative over-building, and the market suffered tremendously.

 

The Federal Reserve has since taken specific steps to reduce mortgage rates. The potential downside of these actions is future inflation. Fortunately, home values have traditionally risen faster than inflation, providing protection for owners. Inflation and growing populations will typically increase values over time, while the real cost of mortgage interest on a fixed rate loan will decline.

 

The combination of locking in a low fixed rate while securing a home at a great price is tough to beat. Home prices and interest rates have already risen from the recent lows, though both are still below trend levels. No one can say with any real certainty how long the current opportunities may last, but one thing is clear: they are not likely to be around forever.

 

If you are ready to seize the current opportunities by investing in your first home, trading out into a new home or increasing your real estate investments, Please feel free to Call/Text 612-701-5335  or E-mail:  Tim@TimLRamey.com   

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Rainmaker
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Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good Evening Tim - This is certainly a good time to purchase.  Buyers should not wait too long.

Dec 28, 2016 05:19 PM #1
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Nathan Gesner
American West Realty & Management - Cody, WY
Broker / Property Manager

The opposite is about to be true as mortgage rates increase and buying power drops while house prices are still high. We'll see what the future holds!

Dec 28, 2016 05:38 PM #2
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Tim L. Ramey

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