(TheNicheReport.com) -- The perfect combination of historically low mortgage rates and depressed median home prices is cause for joy in some homeowner circles. According to a recent report by CNN Money, monthly mortgage payments are now the lowest they have been in several decades, thus making the old adage of "it is better to buy than to rent" finally come true. The estimates by CNN Money are based on the following assumptions:
- - A median price of around $154,400, which can be found in many real estate markets across the United States. - A down payment of 20 percent, required by most mortgage lenders these days. - The current competitive Annual Percentage Rate (APR) of the benchmark 30-year fixed mortgage. - The present median household income -as reported by the Wall Street Journal in September of 2011. This figure has actually come down since the global financial crisis became manifest in 2008.
Based on the above, a monthly mortgage payment of less than $650 is attainable. This would represent a rate that is far less than the often recommended 25 percent threshold for household debt income ratio. There are some places in the United States where the calculations above do not work out. In Honolulu and San Francisco, it is actually cheaper to rent than to buy. Even with the ultra-low real estate prices in many areas of the country, and the equally low mortgage interest rates, the rental market is beating the purchase market by a considerable margin. The reason for this phenomenon is that mortgage applicants are still struggling to meet the strict credit and income requirements set by the lenders. The figures cited above could actually send monthly mortgage payments even lower if the unemployment rate eases and the median income improves. There are no immediate signs of mortgage interest rates going up, and a further reduction of median prices could be experienced due to a looming new avalanche of foreclosures.
