I think so. A home is often the biggest purchase any family makes over its lifetime. And since these purchases are financed over decades, even small changes to prices and mortgage rates can have a large impact to total home-ownership costs.
Comparing current median prices and 30yr fixed mortgage rates to the 2006 peak median prices and mortgage rates, I created the chart below. The total cumulative savings a family receives if they bought today vs. in 2006 is over $230,000. Obviously, the lower prices go – and the lower mortgage rates go – the greater this lifetime savings.
At some point, when home prices fall enough and the economy stabilizes, significantly cheaper home-ownership costs may have a lasting impact on discretionary incomes for millions of US families.
I speak from experience. By far, my biggest bill each month is my mortgage. My mortgage is a serious restraint on my discretionary spending. If my mortgage was significantly cheaper, not only could I spend more this month I could spend more (and invest more) every month until my mortgage is paid off. Multiply that by millions of people (especially if current debts are restructured) and you could have the fundamental makings of a secular bull market.
What are your thoughts?
