Community Corner
House Hunt: Seal Beach, Rossmoor and Los Alamitos
Prices are the same as 2002, but homes actually cost less now.
Say what?
Yes, you read the subhead correctly: Housing prices can be deceiving. Although homebuyers often focus on the selling price, Keith Murphy of RPM Mortgage points out that’s only part of the equation. People often fail to include interest costs in their calculations.
And, right now, with interest rates at a 50-year low and housing prices at 2002 levels, it's a great time to buy. Yes, you still have to qualify for the loan, but that’s simply a process to reasonably ensure the loan is paid back (what a concept).
Find out what's happening in Los Alamitos-Seal Beachwith free, real-time updates from Patch.
“Aha,” you say. “I’ll just wait for prices to drop some more and save even more money.” Sounds good, but not necessarily the best strategy when one realizes that even a small rise in interest rates quickly erases any potential drop in sales price. When rates return to “market” the perfect opportunity will be lost. Possibly forever.
Others may think, from a pure investment standpoint, that renting is preferable to owning a home. Hogwash, we say. With rent inflation predicted to reach 4.5 percent, it only makes good sense to lock in housing costs at today’s unbelievably low rates. It also offers peace of mind come retirement time when monthly housing payments remain level or disappear when incomes tend to become fixed.
Find out what's happening in Los Alamitos-Seal Beachwith free, real-time updates from Patch.
The example Murphy uses to illustrate his point compares a $350,000 home purchased in September 2002 with a $350,000 home purchased today. Ten years ago, the going mortgage rate was 6.48 percent, resulting in a monthly payment of $2,208. Only $318 of that went to principal reduction, the rest went to pay down the interest which, on its own after 30 years would have amounted to a whopping $444,749.
In contrast, a $350,000 home at current loan rates of 3.75 percent produces a monthly payment of $1,621, of which $527 goes toward principal. And by the end of the term, total interest clocks in at $233,526, a savings of some 47 percent.
Although homes in our area go for more than $350,000, plenty of condos on the market sell for less. And Murphy's point applies regardless of price.
In short: Housing prices are way down and interest rates are way down. Those who wait may end up kicking themselves later.
Happy hunting!
