We in the real estate community are often criticized for always seeming to have a Pollyanna attitude about the housing market. Some people believe that the industry’s current call ‘to buy now’ is nothing more than a scare tactic with the sole purpose of creating more commissions for Realtors. So, let’s take a look at whether or not that advice was good advice over the last year.
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. According to the most recent Case-Shiller Home Pricing Index, home values have risen over 10% in the last year. If we look at Freddie Mac’s Weekly Primary Mortgage Market Survey®, the 30 year mortgage rate has increased from 3.67% to 3.91% during that same period.
The table below compares the cost of the same exact house over the last twelve months:
We can see that the advice to buy a year ago made complete financial sense.
What About Moving Forward?
Most experts are not only calling for prices to continue to rise but are also upgrading their projections as the housing market is showing strong signs of recovering.
Regarding interest rates, the 30 year mortgage rate has soared by over a half point already this year and many believe that the increases will continue.