Mortgage and Real Estate Market Understanding – Past – Present - Future
Today – Home Prices - Interest Rates - Affordability
If a client sitting on the sidelines waiting for the "perfect" time to buy, you're not alone. The average first-time homebuyer is now 40 years old—up from 38 just two years ago. But is waiting actually costing them more?
Let's address the elephant in the room. Many buyers remember 2008, when 10 million families lost their homes. Here's what caused it:
Banks gave mortgages to anyone—no income verification required
Loans started at 4-5% then jumped to 11-12%
Builders created 4 million excess homes
When the economy crashed, foreclosures hit 4.6%
Today's reality is completely different:
Income and employment must be verified (it's the law)
Fixed-rate mortgages dominate
Loan officers are licensed and background-checked
Foreclosure rate is just 0.6%
The 2008 crisis wasn't caused by people buying homes—it was caused by illegal lending practices that no longer exist.
What History Tells Us About Home Prices
Over the past 81 years (1941-2025):
73 years: Prices increased
7 years: Prices decreased
1 year: Prices stayed flat
Home prices only fell significantly during 2008. Even through multiple recessions, prices kept climbing.
Understanding Today's Interest Rates
Current rate: ~6.25%
Historical average: 7.375%
Pandemic low: 2.75% (emergency rates)
Yes, rates are higher than during the pandemic. But they're actually below the long-term average. Those 2-3% rates? They only happen during major crises.
The Real Affordability Problem
Most buyers focus on rates and prices. But the real issue is the monthly cash flow.
Real Example:
Meet Emma and Erik. They wanted to buy a $400K home with 20% down to avoid PMI. They had $92K saved but also carried $3,390 in monthly debt payments.
Their original plan (20% down):
Leaves $3K in savings
House payment: $1,944
Total monthly outflow: $3,484
Smarter strategy (5% down + pay off debts):
Leaves $24K in savings
House payment: $2,393 (with PMI)
Total monthly outflow: $2,858
Monthly savings: $626
By applying that $626 to extra principal payments, they'd own the home in 18 years instead of 30—saving over $349,000.
Where Money Really Goes
Small expenses destroy buying power:
- $425/month credit card interest = $70K less house
- $620/month eating out = $103K less buying power
- $145/month subscriptions = $24K less buying power
The truth: Most people can afford a home—they just need to control their monthly spending.
The Cost of Waiting
"I'll wait until rates drop 1%"
sounds smart. Let's check the math:
Buying today —> $342,920 home at 6.125% = $2,083/month
Waiting one year —>$360,066 home at 5.125% = $1,960/month
Buyer can save $123/month but the house costs $17,146 more. To keep pace with 5% appreciation, buyer needs to save $1,666/month after taxes.
Can you realistically do that?
Why Prices Keep Rising
The math is simple:
- 340 million people in the U.S.
- Only 1.4 million homes available
- Household formations increasing
- New construction limited
High demand + Low supply = Rising prices
Stop Waiting
For rates to match 1998 affordability levels, we'd need rates around 4%. That only happens during:
Financial meltdowns
Pandemics
Major economic crises
And if rates did drop that low? Home prices would skyrocket because everyone could suddenly afford more.
The Bottom Line
We can't control:
Interest rates
Home prices
The economy
We can control:
Your monthly spending
Your debt payments
Your down payment strategy
Stop waiting for perfect market conditions. They don't exist.
