Same Price, Lower Cost

According to the KCM Blog, an increasing amount of research continues to build the case  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’re saving $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.

Maybe this is why so many financial advisors are saying that this could be one of the greatest times in history to purchase a home.

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