“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?
Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows.
Moving Forward Together
We’re in uncharted territory with Covid-19. The medical facts about the virus change daily. Meanwhile, the media generates a constant stream of fear inducing headlines. This combination can be overwhelming. To stay grounded during these uncertain times, it serves us well to recall a line delivered by F.D.R during his inauguration speech in 1933 – “the only thing we have to fear is fear itself.” This phrase, at the height of the great depression, gave people hope and a new way to look at a world wide depression that had been going on for three years. Ultimately, this phrase served as one of the pillars that led to the rebuilding of the economy.
Our mission is to provide you with accurate timely information about the real estate market. We follow the best minds in the real estate and share that information with you as it becomes available. Armed with actionable information, you can set aside fear and actively plan for your future. To that end, we’re here for you. Let’s get together for an online meeting to review the market and how it relates to your situation. To be clear this isn’t a sales call — this is one of the ways that our team gives back in these challenging times. To schedule a chat, click the Let’s Talk link and schedule a time that works for you: Let’s Talk.
Like you, we’re counting the days till life returns to normal and we can once again go to Powell’s Books, our favorite restaurants, the beach, the mountains, and all the activities that make Portland an incredible place to live. In the meantime, we’re here for you … stay safe out there … James Bradley