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The Cost Of A Home Is Far More Important Than The Price

Housing inventory is at an all-time low. There are 39% fewer homes for sale today than at this time last year. For Connecticut we are down -30.5% in August there isn’t data yet for September, but we are still seeing buyer demand continuing to set records. 

Zillow recently reported:

“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.”

The same report tracks data from Hartford and newly pending sales there are up +40.2%. For all of Connecticut sales were up +44.8% for the Month of August for the most recent data I can get which still gives you an idea of how active the market is here in Connecticut. 

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?

The Cost of a Home Is Far More Important than the Price | MyKCM

This table calculates the difference in your monthly payment:That’s a savings of $61 monthly, which adds up to $732 annually and $21,960 over the life of the loan.

Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows. So if you are planning to buy a home let’s talk today to get you on track to achieve your real estate goals.

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