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Lincoln Roberts' Blog

By Lincoln Roberts | Broker in Ennis, MT
  • How average purchase price can rise and values still decline

    Posted Under: General Area in Ennis, Market Conditions in Ennis, Home Buying in Ennis  |  October 9, 2012 11:02 AM  |  146 views  |  1 comment
    It is interesting to read the real estate news sites and see new reports of home prices rising.  These reports show the average sales value of homes in an area, and over the last 6 to 12 months in many communities including in Ennis MT-Real Estate- this average sales value has been going up. 

    Here is the reason that these reports of rising average home sales do not necessary mean that property values are increasing.

    With interest rates at all time lows buyers can now afford to purchase a more expensive home and keep the same monthly payments.

    For instance if someone was looking at a property last year that cost $220,000 and interest rates were 4.25% the monthly mortgage payment would have been $1082.  If that person had waited until now to make a purchase with interest rates at 3.3% and wanted to keep their monthly payment in the same range that buyer would now be able to buy a $250,000 house.

    So there we have it, the same person willing to make a $1082 monthly payment can now buy a more expensive home.  The rise in average sales values that we are seeing does not mean that property values are increasing.   While sales are increasing and inventories are declining we are not necessarily seeing the values of property increasing.

 
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