Here’s why homes are more affordable today than they’ve been in 2.5 years.

Search All Newport Homes on the MLS
Get a Home Value Report for Your Newport Home

 

Though home values have continued to increase, the record-low mortgage rates have counterbalanced the cost of buying a home. So far in 2020, mortgage rates have hit record lows on eight separate occasions; you may have heard financial pundits exclaim, “They’ll never be this low again,” but they just keep going lower. I’ve even voiced my own surprise on this blog! 

 

These low rates mean that, in many states, homeownership is more affordable now than it has been in years. For example, Maryland, West Virginia, Arkansas, Kentucky, Iowa, and Louisiana are experiencing affordability levels not seen for more than 25 years! 


Here in Rhode Island, things aren’t quite as dramatic, but it’s still surprising for many to hear that homeownership in our state is more affordable this year—a turbulent year of uncertainty—than it’s been since January of 2018. How is this possible?


 

“

      Your purchasing power in our Rhode Island market is stronger now than it’s been in 2.5 years.

”

 

 

Mortgage rates consist of principal, which is the actual amount that you borrow, and interest, which is the added cost of borrowing that money. If the cost of borrowing continues to drop, then that means your purchasing power rises. 

 

Let’s say you can only afford to pay a total of $1,500 a month. If $500 of your monthly payment goes toward interest, then you can only purchase a home that equals $1,000 a month in principal. However, if only $200 of your monthly payment needs to go toward interest, then you can afford a home with a loan principal of $1,300 per month. Quite literally, it’s more home for your buck! 

 

So, even though we’re in the midst of a crazy seller’s market, it’s a great time to make a move because your purchasing power is stronger now than it’s been in 2.5 years. 

 

If you’re interested in starting your home buying journey, give us a call at the Warner Realty Group or send an email. We’re always here to help you make sense of the market and actualize your goals; we look forward to hearing from you soon!