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Pricing versus Purchasing Power

Categories: Uncategorized | Posted: February 2, 2012

In case you’ve missed it, interest rates are really low right now and pricing is at levels that haven’t been seen in quite some time.  I’ve prepared a simple analysis that shows you what this means for your purchasing power.


1)  Pricing has bottomed and price increases will return to our historical average of inflation.  Let’s assume inflation stays around 3.0% for the next two years.

2)  Interest rates return to 5.0% over a two year period.  This is where rates were pre-recession.  See chart below.

If these two scenarios happen, you’ll need to earn 23% more in two years to buy the exact same house that you could buy today (See table).

The question is, will your income go up by 23% in two years?

Now Next Year The Year After
Price Grown at Inflation $150,000 $154,500 $159,135
Years of Mortgage 30 30 30
Interest Rate 3.75% 4.25% 5.00%
Pricple & Interest Payment $694.67 $760.05 $854.27
9% 23%


Is the market up? Is it down? How do I make heads or tails?

Categories: Uncategorized | Posted: January 18, 2012

Good question. It all depends on what set of numbers you look at. New construction sales are down 11% in Richmond and Columbia counties since 2004. However, if you drill down further you’ll see that Columbia County new home sales are actually up 8% over that same period of time.

So Columbia County is booming right? Not exactly, sales of existing homes is down 30% in the two counties, with Columbia County down 33%.

Huh? How can that be. This is where it gets interesting:
1. The price of materials and labor decreased with the housing recession. This enabled home builders to bring their pricing down. This gave new homes a competitive advantage over used homes.
2. We’ve had our share of foreclosures and short sales, but not as dramatic as other parts of the country. Helping to keep pricing high enough for new construction to still make sense.
3. Fort Gordon and the medical community stabilized our employment base. While our unemployment rate is higher than we’d like, we saw some jobs come into our area.

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