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

Comments

Book cover of the Guide to Graduate Planning Programs 4th Edition

Thinking about Grad School?

New! 4th Edition of the Planetizen Guide to Graduate Urban Planning Programs just released.
Starting at $24.95

Prepare for the AICP Exam

Join the thousands of students who have utilized the Planetizen AICP* Exam Preparation Class to prepare for the American Planning Association's AICP* exam.
Starting at $209
Book cover of Contemporary Debates in Urban Planning

Contemporary Debates in Urban Planning

Featuring thought-provoking commentary and insights from some of the leading thinkers and practitioners in the field.
$18.95
Planetizen Courses image ad

Planetizen Courses

Advance your career with subscription-based online courses tailored to the urban planning professional.
Starting at $16.95 a month