Today’s Home Prices Are Actually Affordable
There is a lot of talk about home prices, especially amongst home buyers. Each month it seems like home prices reach new all-time highs. In spite of the fact that home prices are rising, we still see home sales increasing. The fact remains that in spite of rising home prices demand from home buyers is still at tremendous levels. Much of this has to do with mortage rates continuing to hover near historic lows. At some point, we should be seeing demand from home buyers to completely collapse because of rising prices. However, that is not happening and there is a good reason for it. The reason why home buyers are still searching for the home of their dreams at today’s prices is because homes are still affordable. The team at Streamline Realty is here to break down why houses are still affordable even at today’s high prices.
Affordability is Relative and Different from Price
Even if something has a high price, it can still be affordable if it works within your budget and is a value compared to the prices of other similar items. That is true of all items, whether we are talking about a meal, a car, or even a house. Compared to previous years, today’s home prices are still affordable even if prices are at all-time highs.
Why Inflation Means Buying a Home is Affordable
Today’s housing prices are much higher than those of yesteryear. However, the price of everything is much higher than previous years. Inflation is a fact of life. Over time, the prices of goods and services increase. Inflation is the highest it has been in the United States for the past 30 years. Everything is getting more expensive from milk to meat. So, it should be no surprise that the cost of buying a house is also increasing. Because of inflation, today’s prices for buying a house must be considered in relation to the rising price of other goods in order to determine if the price is affordable.
Why Mortgage Rates Mean Buying a Home is Affordable
Price alone is not the only factor that goes into whether or not buying a house is affordable. While the number of cash-only home purchases has increased over the past year, most Americans finance their home purchase with a mortgage. This means that the cost of financing a house has to be factored into whether or not buying a home is affordable. The price of a home is not the only thing you pay. You also have to pay interest on your home loan, which gets factored into your monthly payment. This means that mortgage rates play a huge role in determining if buying a house is affordable even at today’s prices.
As we discussed, mortgage rates have been hovering near historic lows for a while. Home buyers can lock in a home loan with an interest rate that is lower than at nearly any other point in history. At this point, it is also important to look at inflation. There is some debate over what the true rate of inflation is in our nation with some claiming it is about 3.5% and others claiming it is as high as 6.5%. Whether you take the high-end figure or the low-end figure, today’s rate of inflation is higher than today’s mortgage rates. This means that the value of your home should be increasing at least as much as the rate of inflation, but your payments are locked in at today’s rate. Basically, your house and your mortgage payments become more affordable over time as the price of everything increases around you.
Final Thoughts
Today’s home prices might seem shocking, but so is the cost of a gallon of milk, especially to someone who was used to prices from long ago. Over time, prices increase. That’s just what they do and the cost of a house is no different. While today’s prices are higher than ever before, in some ways they are more affordable than ever before. Today’s high rates of inflation combined with rock-bottom mortgage rates mean that buying a house right now will represent a value long into the future.
Buying a house is not a short-term decision, so do not be scared by short-term prices. Instead, think about what home prices will look like years down the road and think of what you will be missing out on if you do not buy today. Right now is a great time for home buyers and if you would like help turning your dream of homeownership into a reality, contact us. The team at Streamline Realty is here to help you every step of the way.
