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Mack McCoy's Blog

By Mack McCoy | Broker in Seattle, WA

Homes today: more affordable than at any time since when?

Home values in King, Snohomish, and Pierce counties, as measured by the Case-Shiller Index, are down 30% from the peak in July 2007. This is hardly an all-time low; they’re at about the same level they were at in 2004, which was a time of then-record price highs.

Mortgage rates are at their lowest level since the Truman administration, and that’s having a profound effect on affordability.

Put record-low mortgage rates together with today’s home prices, and you’ve got monthly payments that are their lowest since the 1990s!

At the peak of the market, a niceSeattlehome might cost $500,000. With a 6.5% interest rate, a minimum-down buyer would have $3050 mortgage payment.

Today, that home might cost $400,000, and with interest rates under 4%, the monthly payment goes down to $1815 a month:

  2012 2007 2004 1999 1998
House Price $400,000 $500,000 $400,000 $293,000 $269,000
Loan Amount $386,000 $482,500 $386,000 $282,745 $259,585
Interest Rate 3.9% 6.5% 6.0% 7.6% 7.0%
Monthly Payment $1,815 $3,050 $2,314 $1,996 $1,727

You could look at this from a point of view that today’s buyers are spending 40% less on their mortgages than just five years ago; you can also look at it that today’s buyers have a third more purchasing power than in the past: 

  2012 2007 2004 1999 1998
Purchasing Power $400,000 $297,586 $313,726 $266,395 $282,721
Loan Amount $386,000 $287,171 $302,746 $257,071 $272,826
Interest Rate 3.9% 6.5% 6.0% 7.6% 7.0%
Monthly Payment $1,815 $1,815 $1,815 $1,815 $1,815

Either way – the combination of record-low interest rates and bottom-of-the-market prices are making homes much more affordable than at any time in the last dozen years.

Move-up homebuyers who may be discouraged by the currently low values - take heart; you'll more than make up for it on the buying end!



Comments

By Torang | Save $10,000's,  Fri Jan 11 2013, 08:54
Thanks for sharing!

Great Post.
By Jon Kolsky,  Fri Jan 11 2013, 13:33
Great stuff Mack! I bet you are active on others sites as well, at least you should be because this information is great promotional information as well as consumer information..I think more Realtors need to brand their name while providing good real estate information. Keep up the good work!

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