Like many Lakewood families, my wife and I have been looking for a suitable house to put ourselves and our children in for quite a while. And like many Lakewood families, we have been completely priced out of the market. Still, we look around, hoping against hope that we can get a “steal.”
But yesterday, I got really annoyed. My realtor texted me a graphic of mortgage interest rates in 1985 (photo attached), ostensibly to tell me that even though interest rates are consistently going up, they’re still much better than they used to be, so now’s the time to jump in. The realtor, and all other realtors using this argument, are dead wrong.
Let me run through the numbers.
The average mortgage rate today (according to Google) is 6.402%. In 1985, according to the graphic, mortgages were being given at almost a 12% interest rate. Sounds like now is a much better time to buy, right? No.
The median sale price for a home in the U.S. in 1985 was $82,800. Assuming a family put 20% down and took out a mortgage at 12% for the remainder of the cost of the home, it would come out to monthly payments of $694 a month Factoring in inflation, that comes out to $1,911.
Now let’s do current rates and prices. In the first quarter of 2022, the average price for a house sold was $507,800. Put down 20% and take out a mortgage at a rate of 6.402% for the rest of the loan and your left with a monthly bill of… $2,542 – $631 more than you would have been paying per month in 1985 (in 2022 dollars).
It doesn’t end there. How many livable houses do you know of in the Lakewood area that could be bought for $500,000? They practically don’t exist. If you want to be anywhere near Lakewood, you’ll most likely be paying $500k or more just for a decent sized property on which you could build a house on.
Mortgage interest rates are indeed lower than they were in 1985. It’s still a lot more expensive to buy a house today. And hundreds of Lakewood families are suffering because of it.