Why Buy Now? - Interest Rates

There is a lot of talk out there about interest rates going up, inflation, and how that affects the real estate market.  In order to understand the talk, let's get some perspective.  To me, that means getting a brief history of interest rates.  Here is a chart of interest rates in March of every year since 1972.  

Notice that interest rates start out well above 5% and peak in 1972 at around 17%.  Then the rates go into a decline period with some peaks and valleys along the way.  The bright spot is that they have been at or below 5% for a 30-year loan since 2009.  All of this is to just say, that while interest rates are creeping up again and we have talked of inflation, historically speaking interest rates are still low.  

Why does this matter?  It matters because everyone out there wants to get the most for their money.  If you are paying more to the bank then you don't have money to spend on the things you love.  Trip to Key West, for example.  With home prices on the rise due to low inventory and housing starts, it makes sense to take advantage of these low-interest rates.  Here is an example of what rising interest rates can mean for your home purchase.  Take a $300k loan amount at 4.10% for 30 years.  That is a monthly payment of $1,450 without taxes or fees.  That same loan back in 2008 was $1,793.  That is a savings of $4,116 a year.  Not sure about y'all but that would be money I could sure spend elsewhere!

Now let us take that monthly payment of $1,450 and compare it to continuing to rent or lease.  On average, rent in the US is a whopping $2,623.  Wow, I mean just, wow!  That is $1,179 back into your pocket each month on that 30-year loan we looked at above. 

Yes, there is more to a monthly house payment to consider like taxes, PMI(Private Mortgage Interest), and insurance.  We can talk about that next. 

'Til next time, Happy House Hunting!