Let’s not overcomplicate a very simple point about the U.S. housing market…
The U.S. housing market is in recovery mode. That means buying a house is the single greatest investment you can make right now.
Last March, the average existing home in the U.S. cost $164,800. By November, it cost $180,600. That’s a jump of nearly 10%.
And that’s just the average price. There are much bigger moves in some local markets.
Meanwhile, we learn that existing home sales rose 2.1% in October — to an annual rate of 4.79 million homes.
And that home inventories — the total number of homes for sale — were lower than they had been since September 2005. (This means less supply and therefore even higher prices still.)
Prices are up. Sales are up. Inventory is down. Again, you can overcomplicate it. But this tells me all I need to know. The crash is behind us. A recovery lies ahead.
This on its own makes me “table pounding” bullish on real estate right now.
But the story gets even better. Ludicrously better, in fact…
That’s because on top of stupidly cheap prices in many areas… banks are offering you incredibly low interest rates to finance your purchase.
You’ve probably seen some variation of this chart. It shows mortgage rates going back to 1970.
As you can see, mortgage rates are the lowest they’ve been in over four decades. That means the financing to buy an American home is cheaper right now than it has been in over a generation.
In the February issue of my wealth-building newsletter, Unconventional Wealth, I recommend readers take immediate advantage of this situation. And I explain why historically low interest rates are potentially MUCH more lucrative over the long term than beaten-down prices.
According to Bankrate.com, as of Jan. 14, the average 30-year fixed-rate mortgage rate was about 3.54%.
But after speaking with one of America’s top-ranked mortgage brokers, I can confirm that qualified borrowers are tapping 30-year fixed-rate mortgages for as low as 3%.
So let’s see what kind of difference that 54 basis point spread would mean to you if you bought a house for the average price of $180,600 (as of November).
At a fixed rate of 3%… and with 3.5% of the principal down… your mortgage of $174,279 would cost you $734.77 a month.
At a 3.5% mortgage rate, your monthly payment would rise to $782.59.
That’s a difference of $47.82 a month…or $573.84 a year. Of course, there are other considerations such as mortgage insurance. But you get the idea.
If the 30-year fixed-rate jumps to 4%, your monthly mortgage payments would go up to $832.03.
And what happens as house prices continue to recover?
Well, if average house prices go up from $180,600 to $200,000… again with 3.5% down up front… a 4% mortgage works out at $921.41 a month.
In other words, the $180,600 home you could have bought using 3% mortgage financing could become a $200,000 home you buy with 4% financing.
It’s the difference between a $734.77 payment and a $921.41 payment.
That’s an extra $2,244 a year out of your pocket — money you could be spending on renovating your house… on a vacation… on a college savings plan.
Don’t throw this kind of money away. Act now.
Start looking for deals on Zillow.com or Trulia.com. Pick up the phone and start calling realtors. Lock in ultra-cheap financing.
Home prices are cheap. Financing is even cheaper. And the market is in recovery mode. I can’t be any clearer about it. Buying a home now is the single greatest investment you can make right now.
Best Regards,
Aaron Gentzler
Editor, Unconventional Wealth
P.S. To find out exactly how to benefit from the opportunity in the U.S. real estate market, check out Aaron’s latest recommendation to Unconventional Wealth readers. Including how to get the bank to pay you to borrow money. Find full details here.
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