OK, when I saw this headline I had to read the article.
Monthly Payments for Home Buyers
A home buyer purchasing a typical American home at the prevailing average mortgage rate today would have a mortgage payment of $698 a month. This figure is not much different from what a home buyer would have faced 30 years ago. In 1981, home prices were much lower but mortgage rates were reaching 18 percent. Today, home prices have come down by about 33 percent on average from the bubble years, but prices still remain comfortably higher than those of the 1980s. However, thanks to record low mortgage rates, the monthly payment obligations have been greatly reduced.
The condo that I have listed at 958 Q Street is listed for $195,000. When it was first built in 1982 the units in it’s complex were selling for $55,000. Back then you had interest rates at 18%. If you did a 3.5% down loan like today’s common FHA loans, factoring in average rates for tax and insurance, your payment would have been $867 per month (not counting HOA or any possible PMI). Today you can get a FHA loan at 4% (one of my buyers just locked at 3.675 with no points!). That makes a payment of $1167 per month or about $290 more today than 30 years ago.
I was feeling pretty smug for about 5 seconds until I started to think about what $867 would have bought me 30 years ago compared to today. Going back to my youth when a quarter bought you a candy bar and now I think they cost a buck, I had to go to an online inflation calculator. $867 from 1981 after adjusted for inflation is $2150 today!
Well, me and my short lived smug self will just have to contemplate these numbers and the buying power of today’s interest rates over a long over due candy bar…