This post was contributed by a community member. The views expressed here are the author's own.

Health & Fitness

Opportunity is Knocking at Your Open House Door

Examining the numbers behind the best opportunity to purchase a home in decades.

It seems like every economy related report released these days contains news we don’t want to hear. Unemployment is up, job growth is non existent, homes sales and prices are down and confidence in every consumer aspect is struggling. The real estate market has felt some of the most crippling effects of the current economic state, but while uncertainty is the theme of our economy, not everything should leave you feeling uncertain—and that means great opportunity in the real estate market. 

Long term mortgage rates are set based on the yields of 10-year and 30-year Treasury Bills. In mid 1981, the the 10-year Treasury note rate set a high of around 16%.  At the same time home prices plummeted. As rates began to fall slowly through the 80s and 90s, and sharply in the 2000s, home prices did just the opposite. In fact, they followed a near direct inverse relationship to interest rates.

Today, the 10-year Treasury note is just 3%, quite a difference from the of the 1981 high of 16%, yet home prices are falling to a decade’s (or even two decades depending on location) old level. The inverse relationship is nonexistent, which gives a home buyer not only the lowest rates in 60 years, but the lowest home prices in a decade or more. Add in down payment requirements beginning only at 3.5%, and you certainly have the best time to buy a house in a very long time. Looking at a $150,000 home (the same home sold for 20% more in 2005) and factoring in downpayment and interest rate, you can see how this is an opportune time for homebuyers (numbers exclude property tax and PMI).

Find out what's happening in Affton-Shrewsburywith free, real-time updates from Patch.

Time Sales Price Down Payment Monthly Payment 30 Year Fixed

Today

$150,000 5% = $7,500 $722 4.5%

Today

Find out what's happening in Affton-Shrewsburywith free, real-time updates from Patch.

$150,000 20% = $30,000 $608 4.5%

2005

$187,500 55 = $9,375 $1,067 6%

Unfortunately, all good things must come to an end, and if Congress has their say, the end could be sooner rather than later. As a response to the epidemic of homeowners owing more than the value of their homes, Congress is looking to enact a minimum 20% downpayment requirement, which at best case scenario will more than quadruple the downpayment required for the $150,000 home. Realtors oppose this requirement because it all but eliminates first time home buyers from the market. This group benefits the most from low rates and low prices. Regardless of how Congress chooses to proceed, it does not change the fact we have never seen rates and home prices together at these low levels. This anomaly provides great opportunity for homebuyers, but buyers need to act now.

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?

More from Affton-Shrewsbury