Housing Prices Remain High Despite Low Interest Rates

Even though mortgage interest rates are very low, homeownership is not as affordable as many think

Housing Prices Remain High Despite Low Interest Rates
May 24, 2016

When interest rates drop, most believe that purchasing a home becomes much easier because there will be less of a monthly financial burden. While that's true by itself, it doesn't apply to the current housing market, which is seeing the price of homes continue to rise more quickly than interest rates are dropping.

Black Knight Financial Services did the math on the issue and discovered that homeowners are saving about $44 dollars on the monthly mortgage payment on an average-priced property. That by itself is not very significant amount, but when rising prices are worked into the equation, homeowners are really only saving about $18.

The firm noted that home prices have increased on an average of 5.3 percent since the start of the year. However, it is much worse in several states, including Colorado, Oregon, and Washington. Here, the increase in home prices has negated any savings homeowners might have seen from the lower interest rates. Homeowners who purchased their homes before the start of the year saved more than those who are taking advantage of lower interest rates now.

Despite this, homebuyers are profiting from the lower rates. Black Knight Senior Vice President for Data and Analytics Ben Graboske points out that if interest rates were not as low as they currently are, homeowners purchasing an average-priced home would pay $28 more than they would have at the end of last year.

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