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

Monday, September 28, 2020   /   by Elissa Tran

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


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




Housing inventory is at an all-time low. There are 39% fewer homes for sale today than at this time last year, and buyer demand continues 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.”



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?


This table calculates the difference in your monthly payment:The Cost of a Home Is Far More Important than the Price | MyKCMThat’s a savings of $61 monthly, which adds up to $732 annually and $21,960 over the life of the loan.


Bottom Line


Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows.



  first time home buyer, buyer

My UT Real Estate Group with All American Realty
Staci Powell
3297 W Provost Cir
South Jordan, UT 84096
801-913-2463

Based on information from the Wasatch Front Regional Multiple Listing Service, Inc. as of October 25, 2020. All data, including all measurements and calculations of area, is obtained from various sources and has not been, and will not be, verified by broker or the MLS. All information should be independently reviewed and verified for accuracy. Properties may or may not be listed by the office/agent presenting the information.
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