The PRICE Is the Same, But the COST Is Less

Let's put things into perspective. When you are comparing today's real estate market to the environment in 2004 you can make dramatic headlines. When you really get down to the purchase price and making that decision on whether it's a good time to buy our friends at Keeping Current Matters have laid it out well...The PRICE Is the Same, But the COST Is Less.

There is more and more research coming out showing that it makes great financial sense to purchase a home today . Whether it be rent vs. buy ratios, income-to-price ratios or income-to-mortgage payment ratios, purchasing a home right now is a bargain compared to historic norms. Now we want to look at the COST of a home today compared to pre-peak prices.

According to the most recent S&P Case Shiller price index, residential real estate values have returned to 2003 1Q PRICEs. That, in itself, says something. However, when you factor in mortgage rates, the case for buying a home today becomes even more compelling.

In 2003, 30 year mortgage rates stood at 5.88%. Today, they are 4%. How does that impact the actual COST of a home? On a home purchased for $250,000, here is the difference in monthly cost:

That means you save $285.30 a month, $3,423.60 a year and $102,708 over the life of a 30 year mortgage! You buy the home for the same PRICE but the COST is over $100,000 less.

Bottom Line
This is why so many financial advisors are saying that this may be one of the greatest times in history to purchase a home.

Why They Are Saying to Buy A Home Now?

The Price of a home versus the Cost of the home is often a calculation over looked. Our friends at Keeping Current Matters touch on this and bring 4 articles that all talk to the point that this is the time to buy. Why They Are Saying to Buy A Home Now?...

Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have come out this month with the same advice: It Is Time to Buy a Home!

Here are the four articles and a breakdown as to why the advice makes sense.

The Wall Street Journal:
Why It’s time to Buy

CBS Money Watch:
Why the Time to Buy is Now

Forbes Magazine:
9 Reasons to Buy a House Now

National Public Radio:
For Many, It’s Still a Good Time to Buy a Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy.

Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home.

Here is some information to consider.

Interest Rates
Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards
The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:

The qualification process for loans will become more difficult.

The cost of a loan will increase.

Bottom Line
There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

Let's see how many Woodbridge Irvine homes close THIS month!

A quick recap - 4 homes have sold so far this month, (closed), and there are 66 Woodbridge homes for sale, (Active), right now.

13 homes are in Backup Offer status, and a further 13 are "Pending". After last month's very disappointing Closed Sales numbers, (one home!), I have a feeling that we'll see a FEW of these 26 homes close in March.

If I were a gambling lady, I'd bet that 10 of them will close, which will bring the number of Closed Sales in March to 14.

Let's see how close, (or lucky), I am, when I report the final numbers at the end of the month.