Is housing expensive?

home buying, first time home buyer, mortgage, debt financing, financial planning, financial planner, housing costs, rent v own
Home prices and affordability over the past few decades

The headlines about a housing bubble are ubiquitous. But I believe the current growth in competitive home buying is driven buy a structural problem related to supply/demand that was years in the making and the low-interest rate environment has simply poured gasoline on the fire.

The chart at right demonstrates that interest rates have more of an impact on our purchasing power than we realize.

Buying a house is a formula composed of two things - how much it costs and how you plan to finance the purchase? Sure, home prices are much higher than in the past but mortgage rates are far more palatable and when you consider locking in a historically low rate for 30 years, it's pretty compelling.

Real estate is a slow growing asset which is why it makes sense to use leverage and debt to finance the purchase, keeping more of your investable assets liquid to invest in higher growth assets such as stocks. But leverage is also a function of risk tolerance. A financial plan that addresses your goals, timeline and risk tolerance will inform how you approach home buying so you can forge ahead with confidence.


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The present low-interest environment is a major challenge for folks with idle cash on hand. If you're saving for a near-term financial goal (within the next 2 years) such as a down payment on your fir