Effects of Rising Home Prices!

With home prices increasing in values from 2017 to 2018 how does that effect the mortgage payment of your house?  In the summer of 2017 in Las Vegas valley the average home price was around $250,000 and putting 20% down making your loan amount $200,000 with an interest rate for a conventional loan around 4% for a 30 year fixed loan.  This made your payment for principle and interest $951.66 per month.  Take that same home in 2018 and  the average price of that home is now $297,000, with putting 20% down a new loan amount of $237,600.  Keeping the same interest rate of 4% on a 30 year fixed and your payment is now $1130.57.  That is an increase of $179.91 per month.  And now with the average time someone is staying in a home according to the NAHB( National Association of Home Builders) at 13 years that is an increase of $27,909.96.  But that is with the interest rates staying the same which they have not.

 

Effects of Rising Interest Rates!

Not only do you have to concern yourself with the rising home prices but interest rates have increased and will continue to increase according to the Federal Reserve.  In the summer of 2017 interest rates for a conventional loan with a 720 credit score were at 4.00% on a 30 year fixed. In today’s market in the Las Vegas Area, the interest rate for someone with 720 credit score and putting 20% on a loan amount, that same 30 year fixed mortgage is now at 5.125%.  So let’s take the same example of the $250,000 home price of a year ago and a loan amount of $200,000 your mortgage payment in todays terms with just a rate increase are now $1084.34 which is an increase just because of a higher interest rate $132.68 from the previous year.  That is if the price of the home also stayed the same $250,000.  But unfortunately that didn’t happen either.

 

Effects of Both Home Price Increase and Interest Rate Increase!

We in the Las Vegas Area got hit by both an increase in home prices and increase in interest rates.  So what does this do to what happens with our average sales price.  The same home increased in value to $297,000, loan amount $237,600 and the interest rates on that 30 year fixed loan with a 720 credit score and putting 20% down makes your mortgage payment of just principle and interest now $1,288.20.  Now the difference to buying a year ago to now has cost you $336.54 per month and a down payment difference of $9,400.

What this tells us is waiting to buy is not necessarily a good thing.

If you would like to be pre-qualified for contact Bruce Singer with Vision Home Mortgage at 702-217-5525 or click the link on this page.