Somebody please tell homebuyers rates are still low

November 21, 2013
Author: Stock, Kyle/Business Week

D.R. Horton, the nation’s biggest residential builder, confirmed that new home orders are down 2 percent from a year ago. CEO Donald Tomnitz attributed the dip to consumer sensitivity to tiny fluctuations in interest rates from week to week.

“I don’t mean to date myself,” he said. But “no one around this table can remember mortgage rates being higher than 6 percent or 7 percent. And I think one of the factors that we are dealing with, quite frankly, is most analysts, and most young buyers – especially first-time home buyers in the market today – have been accustomed to low rates for all their lives.”

Buyers might also be improving their mortgage math skills in the wake of the real estate market boom going bust. A single percentage point over three decades does add up fast.

A year ago, the average D.R. Horton home sold for $227,304, which a buyer could have financed for 30 years at about 3.38 percent. Today, the cost is $261,400, with buyers likely paying closer to 4.49 percent. The difference in sales price is just over $34,000; however, the 2013 buyer will end up paying nearly $104,000 more over the life of the loan, including approximately $64,000 extra in interest payments.

Back to Main
Website Design by Colony One