Today's $600 is Yesterday's $400!

As we battle through low inventory, multiple offers, and rising prices, pundits are comparing today's market to peak markets of previous years. However, there is one very significant difference that makes today's market so much more manageable for buyers: historically low interest rates. Today's $600 is the $400 of yesteryear.

 What does that mean? Consider 2003, a year when the market was active, prices were healthy, and interest rates were about 6.15 %, according to Freddie Mac. As such, each $100k of mortgage (principal/interest) cost a little more than $600 per month. Fast forward to today with Freddie Mac noting interest rates in the mid 3% range, making each $100k of mortgage (principal/interest) about $445 per month. What that means then, is that the cost of a mortgage today is about 25% less than it was a decade ago! 

  Wow! This gives today's buyers incredible purchasing power, and the ability to focus more on the cost of owning a home and how it fits into a monthly budget, rather than only on the purchase price. If it takes a $100k more to get the home you want, financing it for an additional $445 a month may be pretty manageable. That amount decreases even more when you calculate in the potential tax savings. 

 The same goes for paying more for an updated and remodeled home compared to one that is more original and requires a lot of work. It's much more manageable to finance $100k, for example, than paying less and then coming up with funds out of pocket (along with time and effort!) to pay for a new kitchen and baths. And if you follow national trends and live in your home for say, seven years, the total amount you're paying for that new kitchen and baths as part of your loan is a fraction of what you would pay out of pocket to install them. 

 By no means am I suggesting that $100k, or $445 per month, are amounts we should be cavalier about. But the low cost of money allows us to aggressively pursue the homes we want knowing that we have some options, rather than hitting a wall. In today's market, it's not so much about the sale price, it's the monthly cost of owning the home of your dreams that counts.

 And the first step to securing your dream home is to hire an excellent Realtor who can guide you through the process and help you focus on the factors that really matter, rather than react to a list price which may or may not reflect the true value of a home. 

So take advantage of our current market, and let it work for you!