The United States Housing market has seen some substantial declines over the past five years. Government Efforts, as well as the Europe crisis have caused mortgage interest rates to reach new lows. This means that real estate everywhere is on sale.
Right now mortgage interest rates can be obtained for less than 4%. If you choose a 15 year fixed mortgage, which reduces the term of your home loan in half, or an ARM, your mortgage rates are even better; sometimes approaching 3%.
Realize this, over the last 50 years the average home loan rate has averaged substantially higher. In 1981, mortgage rates peaked at 18.61%. Now, mortgage interest rates are around the rate of inflation. If inflation remains normal, the appreciation of your home value will be almost equivalent as the portion of the mortgage payment that goes towards interest.
If you purchased Sacramento Short Sales with a $100,000 mortgage loan right now, you’re monthly P&I payment would be just $467.38 a month. In comparison, at 8% interest, the same real estate loan amount would be $733 a month. That’s a monthly savings of $265 a month, not because you bought a less expensive home, but because home loan rates are so cheap.
If you are real estate investing, or deciding whether to purchase a house for the first time, you need to look at your monthly payment for what it really is. The interest and taxes are essentially money wasted. This portion of your house payment is essentially “rent.” If your interest is going to be more expensive than paying actual rent, then the financial advantages of home owners aren’t there. The current, record low mortgage rates make home buying less expensive than rent for similar properties.
It’s not just a good time to buy because mortgage rates are low, in addition, real estate prices are also down. In some areas home prices are down to the levels they were ten to fifteen years ago. There are some incredible deals out there, especially if you purchase short sales and foreclosures.
In general, the real estate economy makes right now a fantastic time to invest in properties.
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