Mortgage Rates, Home Prices Turn Back the Clock in Michigan
By Richard BarringtonLocal Lender Columnist
Jun 5, 2008
Along with slowing growth, one of the biggest economic concerns people have right now is inflation. Inflation can make it feel like you are taking a step back for every step forward you take in income and savings -- no sooner do you get a little more money than you find everything has become more expensive. That's why conditions in the housing market, especially in Michigan, are an inflation-fighter's dream. They let home buyers turn back the clock to when things were cheaper.
This is no small feat, because everything else seems to be getting more expensive. Most people have noticed this most obviously at the gas pump, and now that winter is working its magic, heating bills are also causing an epidemic of sticker shock. But the ravages of inflation go beyond energy costs. Last year, overall inflation as measured by the Consumer Price Index made its steepest increase since 1990.
Against this backdrop, home buyers should welcome what is going on in the housing market. At a time when most other prices are going up, it should come as a relief to know that housing costs are declining -- after all, housing often represents the largest single bite out of a household budget.
Retro Rates
The retro environment begins with mortgage rates. Mortgage rates -- the interest paid on money borrowed to buy a house -- have a huge impact on the overall cost of a mortgage. This cost shows up in every monthly mortgage payment. That's why falling mortgage rates should be welcomed eagerly by new buyers.Mortgage rates have declined by over a full percentage point since last summer. By the end of January, they were at levels last seen in 2005. This is one way that housing costs have turned back the clock on inflation -- rather than things getting more expensive over time, borrowing costs are now the same as they were nearly three years ago.
Turn of the Century Home Prices
Home prices have also turned back the clock, and buyers in Michigan can benefit more than most. Michigan never participated in the overheated housing boom seen by some parts of the country. Combine this with a recent slump in prices, and you'll find that home prices in the state are now cheaper than they've been in years.For example, home prices in the metropolitan Detroit area are back to levels last seen in the year 2000. So, if you feared that you missed this decade's housing boom, you get a do-over. Mortgage rates, and especially home prices, have turned back the clock on inflation.
Sources: About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.