Besides the typical reasons of building equity for the future and creating a place to raise a family, one blogger instead looked at today’s housing market in comparison to the past, citing three reasons for why now is a great time to be a homebuyer.
Ben Carlson, who manages portfolios at Ritholtz Wealth Management, in an opinion piece on MarketWatch, put into perspective, especially for those new to the market or about to enter it, just how different today’s market is. And how it’s better in their favor.
1. Everything is online
First, and to no surprise, he noted that everything today is online, including mortgages.
From the piece:
You can typically see 20-30 pictures of every house that’s on the market on the internet. You can make first-level determinations from your own living room about the types of homes you would like to look at without having to go to dozens of places in person. You can pull up tax records, school district maps and neighborhood reviews on every house on the market. There’s a huge timesaving aspect of being able to cross off the ones you don’t want to physically visit.
For example, Zillow Group posted in it most recent earnings that things are going really well, better than ever in fact, for the Zillow Group websites, which includes consumer brands Zillow, Trulia, StreetEasy, HotPads and Naked Apartments, in terms of website traffic.
2. Bigger and better houses
And it’s not only the growth of going online that’s making the process better. Carlson also adds that even houses today are completely different than they were in the past. The U.S. Census just released a report on the characteristics of houses going back to the early 70s which make this abundantly clear.
Here are just a few of the facts:
- In 1973, 49% of new homes had no air conditioning. In 2015, just 7% of new houses have no AC.
- In 1973, 40% of new homes had 1.5 bathrooms or fewer. In 2015, just 4% have fewer than 1.5 bathrooms.
- In 1973, the median new house had 1,525 square feet of space. In 2015, the median new house has 2,467 square feet of space.
3. Mortgage rates
His last point explains exactly what people mean when they say ‘historically low’ interest rates.
Right now, mortgage rates sit near the lowest levels witnessed all year. Freddie Mac’s most recent report recorded the 30-year fixed-rate mortgage at an average 3.60% for the week ending June 9, 2016.
Here’s his math from the piece:
So at today’s median home value — $296,400 — and at current mortgage rates — 3.63% — the monthly payment would come out to $1,349 a month (before taxes, PMI, down payment, etc.). That same mortgage at 1981 interest-rate levels would have cost you more than three times as much or $4,136 a month. Your money goes much further at today’s rates than any time in the past 40-plus years.
People talk about a student-loan crisis these days, but I’m guessing the savings we now receive from lower interest rates on home loans has to dwarf those in comparison.