Arizona, The COST of Your Next Home Will Be LESS Than Your Parents’ Home Was

The COST of Your Next Home Will Be LESS Than Your Parents' Home Was | Simplifying The Market

There is no doubt that the price of a home in the Phoenix Metro and Prescott Quad Cities is climbing up. However, when we look at the cost of a home, it is cheaper to own today than it has been historically.

The Difference Between PRICE and COST

The price of a home is the dollar amount you and the seller agree to at the time of purchase. The cost of a home is the monthly expense you pay for your mortgage payment.

To accurately compare costs in different time periods, we must look at home prices, mortgage rates, and wages during each period. Home prices were less expensive years ago, but paychecks were also smaller and mortgage rates were much higher (the average mortgage interest rate in 1988 was 10.34%).

The best way to measure the COST of a home is to determine what percentage of income is necessary to buy a home at the time. That would take into account the price of the home, the mortgage interest rate and wages at the time.

Zillow just released research that examined home costs using this formula. The research compares the historic percentage of income necessary to afford a mortgage to the percentage needed today. It also revealed the cost if mortgage rates continue to rise as experts are predicting. Here is a graph of their findings*:

The COST of Your Next Home Will Be LESS Than Your Parents' Home Was | Simplifying The Market

Rates would need to jump to 7% in order for the percentage of necessary income to be greater than historic norms.

Bottom Line

Whether you are an Arizona homeowner considering selling your current house and moving up to the home of your dreams, or a first-time buyer trying to purchase your first home, reach out to me via text or call at (602) 300-0423 or at any of the social media sites below and let me know how I can best serve you!

               

*Assumptions in the Zillow report: Buyer puts 20% down, takes out a conforming, 30-year fixed-rate mortgage at rates prevailing at the time, earns the median household income, and is buying a median-valued home.

Ben Zallaha

Ben Zallaha
Realtor
Realty ONE Group Mountain Desert
Prescott Arizona
(928) 277-8685
Buying or selling, my primary focus to make the transaction as smooth and hassle free as possible. How can I serve you?
Posted on April 12, 2018 at 8:05 pm
Ben Zallaha | Category: Blog

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