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The Price Is the Same, It Just Costs Less

Same Price, Lesser Cost

The papers will be full of articles urging homebuyers to purchase a home this week before the Homebuyer Tax Credit expires. The articles will be correct. Getting a home into contract by this Friday, April 30 will enable you to collect on the tax credit.

However, it is not just the tax credit that makes this the best time in a long time to pull the trigger on the home of your dreams. Prices have reached levels not seen since before the housing bubble. The following graph shows that, according to the S&P Case Shiller Pricing Index, home values have fallen to  August 2003 prices.

You can purchase a home today at the same PRICE it sold for seven years ago.

And it will actually COST you less! This blog has been making the distinction between the PRICE and the COST of housing for months now. Price is what you agree is the value of the home. Cost is what you pay every month in the form of a mortgage payment. The cost is a combination of the price and the mortgage interest rate you will pay over the life of the loan.

Interest rates are at historic lows. Interest rates in August of 2003 were over a full percentage point higher than they are today. We can see in the table below that, even though you would pay the same price for a house today, your mortgage payments on a $200,000 loan would be $145.61 less each month. That is an annual savings of $1,747.32. Over the life of a thirty year mortgage you would save $52,419.60.

What does this mean to you?

If you can, get the home in contract by the end of the week for the sake of the tax credit. But if you miss that deadline, still move forward with the purchase before interest rates rise.


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5 replies

Trackbacks & Pingbacks

  1. […] With record low 30 year mortgage rates (under 5%) and the motivation of sellers makes it a great time to purchase a home.    Remember, the real cost of the home over 30 years with low interest rates versus the ’sticker price’. […]

  2. […] 4. In most areas of the country, housing average sales prices are at approximately the 2003 levels back before the huge increases of the 2004-2006 boom. So with 2003 prices and 2010 interest rates, the net to the buyer’s bottom line is impressive!! Check out these charts from one of the best real estate analysts in the business, Steve Harney’s blog http://kcmblog.com/2010/04/26/the-price-is-the-same-it-just-costs-less/ […]

  3. […] The Price Is the Same, It Just Costs Less […]

  4. […] out this very interesting article from the folks at http://www.KCMBlog.com about this being a good time to buy real estate. Contact Bob […]

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