Home Prices Are Not As High As They Appear

Housing is up more than 240% since 1989 and up 56% since 2013. WILD, right?? Well, take those numbers with a grain of salt. 

In certain areas, yes housing may appear unaffordable to some. But it’s actually not as bad as it looks. To put home prices into context, look at mortgage rates over time. Typical interest rates were greater than 10% in 1989. 10%!!! So while prices were far lower back then, the cost of borrowing was way higher. And after adjusting for inflation AND interest rates, monthly mortgage payments are now actually 30% lower than they were in 1989. 

Now ok fine, admittedly these statements don’t exactly apply to very high cost of living areas like New York City or Silicon Valley. But the point is, housing is not as expensive as it appears to be based solely on its sales price. You just have to look at the bigger picture to make a more realistic assessment.