Why Buying a Home Now Isn't the Bargain You Might Think

With home prices at their lowest in a decade and mortgage rates at historic lows, one would thing buying a home now would be significantly cheaper than it was five years ago. Not so, says a new study.

Nick Timiraos digs into the findings of the study [PDF], authored by Andrew Davidson and Alexander Levin of mortgage consulting firm Andrew Davidson & Co, which looks at the full financing package associated with buying a home, and finds that, "the total cost of homeownership, as a share of a borrower's income, is the same today as it was during the height of the housing mania."

Timiraos describes the reason: "borrowers have to put more money down to get a loan, and the exotic lending products that allowed borrowers to make low initial payments have gone away. That means while the absolute monthly payments are lower, the all-in costs of homeownership haven't become more favorable."

"The erosion of down-payment requirements from 2000 to 2006 reduced borrower costs by around 15%, according to Messrs. Davidson and Levin, while tighter down-payment standards since 2006 have raised borrower costs by 22%. That more than offsets the benefit of a drop in interest rates from around 6% to less than 4%."

Full Story: Why Housing Affordability Is a Mirage


Brand new! Urban Grid City Collection

Each city has its own unique story. Commemorate where you came from or where you want to go.
Grids and Guide Red book cover

Grids & Guides

A notebook for visual thinkers. Available in red and black.
Blockitecture - Garden City

Just In! Get the Garden City Expansion

New from Blockitecture! Create towers, cities, and dwellings with this set of architectural building blocks.
AICP CTP Storefont Display

The first online AICP* CTP exam prep class

Are you ready to take the AICP* Certified Transportation Planner exam?
Priced at $245 for May exam!