I was looking at a graph of historical mortgage rates today. In August of 2018, 30 year mortgages were about 4.5%. But in August 2020, 30 year mortgage rates are about 3%. On a $350,000 home with 20% down that is about $238 difference per month. So you can spend the same amount of money as you could two years ago, but your payment is $238 lower today. That is a great deal and that is one reason why we are seeing so much demand for housing. It is hard to believe, but just four years ago the median home price in the Lake Nokomis area was $238,000 compared to $318,000 today. That is about a 9.5% increase per year. So this is good if you own property because your equity is going up fast, but it is making home affordability a bigger problem in south Minneapolis.
So what do you do if you are looking to buy right now in south Minneapolis? If I was looking to buy right now I would look for a property that is either a duplex or a home that has the ability to be converted to a duplex or has enough land to build an ADU (accessory dwelling unit). Even though interest rates are low, prices are still higher. Home prices are about $50,000 higher in Lake Nokomis then they were in August of 2018. Also, property taxes have increased in Minneapolis in 2018 by about 5%, by about 5% in 2019, and are set to increase 6% in 2020. So you are paying less in mortgage interest, but more in property taxes. So the savings from the lower interest rates are being off set from the increasing property taxes. I guess you just can't win. That is why I would be looking to off set my expenses with a duplex or a second unit from an ADU so I could get rental income.
So in the end, get your credit in a good place, have your money for the down payment and know where you want to live. Then wait for the great deal to come to the market and put a great offer in. If you need help finding a good deal give me a call.