Shifting The Perspective On High Interest Rates

 

SHIFTING THE PERSPECTIVE

ON “HIGH INTEREST RATES”

Yes, we have seen historically low interest rates within the last few years also known as “Unicorn Years” in Real Estate. 

Sorry, but 3-4% interest rates are not a thing anymore and probably won't be back.💥🫧

Please, do not fixate on the interest rate! Don't let the interest rates decide if you should buy a home.

Let's try to shift your perspective and give you something to ponder. 

WHY INTEREST RATES ARE HIGH

When the market started to shift, and the government started to increase inflation, the interest rates shot up rapidly, leaving people with that feeling of, “sticker shock” and fixated on interest rates only. 

People who were in the market to buy a home lost a lot of purchasing power. Many decided to put off their dream of buying a home and to wait until the rates went “back down” to 3 and 4%, which isn't normal. 

🙄 Many other people thought the market was going to crash… that's a whole ‘nother topic in itself…. 

ANOTHER PERSPECTIVE

Let’s compare interest rates to something else everyone has been complaining about…. 

⛽️ Gas Prices! Let’s compare then and now…

GAS PRICES 1990 vs 2024  

The national gas price in 1990 was $1.04 per gallon. Whereas today (2024) it’s $3.50 a gallon. 

However, let's remember how many miles per gallon did we get in our cars? 🤔

So I took to google and looked up popular cars in 1990. 

The most driven car in 1990 was, The Honda Accord. According to the US Department of Energy, the Accord averaged 22 miles per gallon.

Let's compare that to a 2024 Honda Accord… According to the US Department of Energy the 2024 Honda Accord averages 32 miles per gallon. 

🤯 A whopping 10 more miles!!! 

VALUE OF THE DOLLAR 1990 vs 2024

With that being said let's see what the value of the dollar was in 1990 vs today… 

According to the CPI Inflation Calculator, “$1 in 1990 is equivalent in purchasing power to about $2.42 today, an increase of $1.42 over 34 years.” 

Meaning $1 in 1990, buys 41.32% of what it did in 1990.

BREAKING IT DOWN

I'm not a mathematician so here goes…. 

So, in a 1990 Honda Accord it would cost you $4.73 to drive 100 miles with 1990 gas prices (100 miles /22mg x1.04 per gallon of gas).

Driving the same distance (100miles) in a 2024 Honda Accord would cost you $10.94 (100miles/32mpg x3.50 per gallon) significantly more than 1990, right? 

🤪 WRONG! I told you I'm not a math genius!

We did not calculate inflation; the value difference of a dollar in 1990 to 2024, which if you recall was 41.3%... 

So let's do that math to determine how much it would really cost in 1990 to drive 100 miles… $4.73/one hundred miles/41.3%= $11.45 in today’s market.

 

That is $0.51 more per gallon 🤜🏼 🎤

Did I change your perspective?

Still not convinced?  Consider this… the average mortgage interest rate from 1990-1999 was 9.83% (Rocket Mortgage).

MY PROFESSIONAL OPINION IS

DO NOT let the interest rates decide if you should buy a home. 

Instead, find out what you can afford and what monthly payment you are comfortable with. 

Let your first home be a place you put sweat equity into. Let natural appreciation take place and then move up into your dream home. 

There is nowhere more important than where you live. 

Your home is where you lay your head at night, seek solitude and raise your family. 

If you feel this is your year to purchase or sell a home,  

I’d  love the opportunity to help you!