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Lower property values are making homeownership more attractive than renting in many of our local markets, which means that paying a mortgage may be cheaper than renting in your area, whether you live in Burbank, Toluca Lake, Glendale or Studio City.
Buyers have the upper hand as inventories are rising and sellers are forced to make critical pricing decisions based on how motivated they are to sell.
Lower mortgage rates are the result of the current recession. What it means to you is that on a 30-year fixed-rate loan amount of $200,000 at 5%, the interest paid over the life of the loan is $186,512. That brings the total loan payments to $386,512. At 6%, the amount of interest paid rises to $231,676, a 24% increase. At 7%, it’s $279,018, a 49% increase. Given that rates have gone below 5% for many loan types this is an unbelievable time to buy.
The housing market collapse of the last few years has created one of the best buyer affordability conditions with the percentage of median household income needed to pay the mortgage on a median priced home at a 30-year low.
Consider the decision to buy carefully as it has to make sense for your situation, but if you are waiting because you think prices are going lower, you may want to think about how good your ability to time the market is versus the sustainability of low interest rates. Also keep in mind that the real estate market is and will continue to be a cyclical industry, so at some point, the jobs picture will look better, the economy will start to rebound and housing prices will increase, along with interest rates.
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