The Cost of a Home Is Far More Important than the Price

Dated: September 22 2020

Views: 17

The Cost of a Home Is Far More Important than the Price

The Cost of a Home Is Far More Important than the Price | MyKCM

Housing inventory is at an all-time low. There are 39% fewer homes for sale today than at this time last year, and buyer demand continues to set records. Zillow recently reported:

“Newly pending sales are up 25.5% compared to the same week last year, the highest year-over-year increase in the weekly Zillow database.”

Whenever there is a shortage in supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the real estate market right now. CoreLogic’s latest Home Price Index reports that values have increased by 5.5% over the last year.

This is great news if you’re planning to sell your house; on the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. However, purchasers should realize that the price of a house is not as important as the cost. Let’s break it down.

There are several factors that influence the cost of a home. The two major ones are the price of the home and the interest rate at which a buyer can borrow the funds necessary to purchase the home.

Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.87%. At this time last year, the rate was 3.73%. Let’s use an example to see how that difference impacts the true cost of a home.

Assume you purchased a home last year and took out a $250,000 mortgage. As mentioned above, home values have increased by 5.5% over the last year. To buy that same home this year, you would need to take out a mortgage of $263,750.

How will your monthly mortgage payment change based on today’s lower mortgage rate?

This table calculates the difference in your monthly payment:The Cost of a Home Is Far More Important than the Price | MyKCMThat’s a savings of $61 monthly, which adds up to $732 annually and $21,960 over the life of the loan.

Bottom Line

Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Jeffrey Daniels does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Jeffrey Daniels will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

Latest Blog Posts

Why Your Home Inspection Matters [INFOGRAPHIC]

Why Your Home Inspection Matters [INFOGRAPHIC]Some HighlightsBuying a home and wondering if your inspection is necessary? While some buyers may decide to waive their inspection,

Read More

Why Right Now Is a Once-in-a-Lifetime Opportunity for Sellers

Why Right Now Is a Once-in-a-Lifetime Opportunity for SellersIf you’re thinking about selling your house in 2022, you truly have a once-in-a-lifetime opportunity at your fingertips. When

Read More

Are You a Homeowner Thinking About Climate Change?

Are You a Homeowner Thinking About Climate Change?Americans are more aware than ever of the effects climate change and natural disasters can have on their homes. According to a report from

Read More

The Next Generation of Homebuyers Is Here

The Next Generation of Homebuyers Is HereMany members of Generation Z (Gen Z) are aging into adulthood and deciding whether to rent or buy a home. If you find yourself in this group, it

Read More