A Tale of Two Eras: The 50-Year Case for Buying vs. Renting

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The world of real estate and finance has undergone significant transformations over the past five decades. One of the pivotal factors shaping the housing market is the fluctuation of mortgage rates. In this article, we take a journey back to 1971, a year that marked the beginning of a new era for mortgages, and compare the mortgage landscape of that time with the rates we see today.

1971: The Dawn of Change
The year 1971 was a historic moment in the financial world as it marked the end of the Bretton Woods system and the gold standard. It was also the year that witnessed the birth of Freddie Mac (Federal Home Loan Mortgage Corporation) and the beginning of the modern secondary mortgage market. In 1971, the average 30-year fixed mortgage rate hovered around 7.5%,
marking the start of an era where interest rates began to play a more prominent role in the homebuying process. Interest rates in the early 1970s were influenced by economic factors such as inflation, government policies, and global events. The oil crisis of 1973 and subsequent economic turmoil contributed to a rise in inflation, leading to higher mortgage rates in the years that followed.

Today’s Mortgage Rates
Fast forward to the present day and we see that both domestic and global economic trends are continuing to affect mortgage rates. After a period of historic lows, sometimes bottoming out at 2.5% or even lower, today’s mortgage rates average around 7.84% for a 30-year fixed rate loan. Middle Eastern unrest, fluctuating fuel prices, higher Fed interest rates due to inflation concerns, etc…is this déjà vu? So that being said, what is the case for buying real estate during these uncertain times?

Marry the House, Date the Rate!
Consider rental rates in America today. According to www.rentaldata.org, for 2021, the average rent for a 4 bedroom home was $2200/month. For the same home, assuming a market price of $350,000, the mortgage at 7.83% would be $2021.46, according to www.bankrate.com. Refinance that mortgage at a rate of 3.75% in just 5 years and that payment drops to $1620.90 – a savings of $400/month! Combine that with long-term equity appreciation of 3% per year, and the savings are staggering. Financial history proves that renting may prove cheaper for a short-term strategy but investing in real estate and its reliable growth trend will always yield greater and more satisfying financial results. Ultimately, the market rate for buying a home can seem daunting when compare to a decade ago. But the math does and will continue to work out in favor of buying vs. renting. As the article title recommends, “Marry the house, just date the rate.”

A Trusted Partnership
Weathering a storm, literally or figuratively, is difficult by yourself. The workload is immense, the anxiety can be crippling, and it’s easy to develop tunnel vision, not being able to escape the “now” to consider “next”. With a trusted and experienced partner, however, strategy overtakes stress and you see yourself accomplishing what you set out to do. Andrea Reeves has spent over 20 years in the real estate industry, and she has certainly been through many market storms filled with uncertainty. Let her expertise guide you down your path and you’ll see yourself at the pinnacle of your mountain, literally!

There’s a reason why successful people like Warren Buffett, Bill Gates, and others have invested heavily in real estate. It’s a long game in some situations but the security and intrinsic value of real estate has proven itself to be worth the cost time after time. Rates will change with the tides but the opportunity to purchase your dream property is fleeting. Don’t be afraid to strike while the iron is hot.

Contact an agent at Regency Properties today!
Email [email protected]
Call (336) 246-2307

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