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Is It Time to Purchase That House? A Historical Comparison

The housing market has certainly gone through its ups and downs in the past 10 years hasn’t it? From the year 2000 through 2006, houses skyrocketed in value, causing many individuals to jump into property ownership, certain that they would make a profit on their investment. Well, much like the tech stocks, the bubble inevitably burst. In 2007, the sub-prime mortgage market became an issue, putting a strain on banks all over America. Banks were forced to repossess many homes due to unpaid mortgages and the value on properties began to crumble. Currently, the property values appear to be at an all-time low. So how does home ownership compare to 10 years ago? Is it really a good time to buy?

Upon embarking into the new millennium, the mortgage loan rates were not at a historic high or low. They could best be classified as ‘moderate’ with 30-year rates at 8.0% APR. However, today is a different story. We are certainly resting on some of the lowest rates in history. Today, rates for a 30 year mortgage can easily be as low as 4.4% APR. Obviously, the rates today are much lower than the rates in the past, but how much difference can this really make? I mean, it’s only a 3.6% difference, right?

In order to stick with some easy figures, let’s assume that we need a loan of $100,000 for our home purchase. Using the average rate from the year 2000, we can calculate the payment needed each month as well as the total payment after 30 years (this can easily be calculated with an online mortgage calculator). In the year 2000, you can see that the monthly payment comes to $733.76 per month, which means that the repayment amount after 30 years (360 months) comes to $264.153.60.

So what the total repayment be on this same loan amount today? Using the average rate of 4.4% APR, we calculate that the monthly payments would be $500.76. After 30 years of payments, we would have paid $180,273.60.

As you can see, purchasing a home now (rather than 10 years ago) presents a savings of $83,880! Amazing isn’t it? If you are financially able to purchase a house today (meaning that you have at least a 20% down payment), get out there and do it! It certainly is a great time to buy!



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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