Crazy Times – not really

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Gary Kelley, Realtor®
Gary Kelley, Realtor – http://www.MoveWithGary.com/
[email protected]
508-733-6005

Who remembers Crazy Eddie? Crazy Eddie was a retailer known for ads proclaiming, “Crazy Eddie’s prices are INSANE.” (Yes, there was also a serious fraud eventually leading to the demise of the company.  Just remember the ads.

We seem to be in a similar time. Every day badness is proclaimed. Mortgages are over 7%. The fed is signaling a rise in the fed rate. Houses are no longer affordable. Tom and Gisele are divorced. Elon Musk owns Twitter. Great headlines to be sure.

Let’s focus in on housing.  Yes, rates are up.  Certainly not as high as in the 80s when they were in the teens.  Certainly, affordability is impacted.

Here is a look at affordability.

Last year rates were down.  And so was inventory.  So, it was likely you’d end up paying more…. maybe $100K more.  Assuming you could tolerate the open house lines, parking etc.  (It was an INSANE time)

What if you bought the same home one year ago? Well, there is a good chance you would have had to pay $100,000 over asking, so a house for $500,000 may have gone for $600,000. If you put 20% down ($120,000) and financed $480,000 at 3%, the monthly Principal and Interest would have been $2023.70.

 

2021 2022
Home Value $600,000 $500,000
Down Payment $120,000 $100,000
Amount Financed $480,000 $400,000
Interest rate 3% 7%
Monthly Principal and Interest $2,023.70 $2,661.21

 

When compared to the current market scenario the savings difference is $637.51, but you would have had to put down $20,000 more out of pocket and owed $80,000 more on your mortgage. Also, there is a good chance you may be able to refinance the $400,000 and lower your monthly payment when interest rates fall back to a more normal range. But, once you financed that $480,000, that $80,000 does not disappear by refinancing and you may very well have a higher mortgage balance when you go to sell the property at some point. Also, in either case you need to add taxes and Insurance of $493/mo.

We have more homes for sale now than in 2021 (according to MLS data) and not as many as 2020.

So, it is not all bad news.  It’s how you look at it.  Heck, if you’re dating Tom and Gisele made an improvement in the dating pool.

Here is free app for your phone/tablet tied directly to the MLS  https://www.homesnap.com/Gary-Kelley

Gary is heard on WCRN AM 830 and/or seen on WMCT-TV discussing “All Things Real Estate.”

If you need advice on selling your home or buying a new one, give us a call 508-733-6005.

Crazy Times – not really