

This is not to say that lower levels of inflation do not affect our citizens. For example, if inflation averages 2.5% per year (a bit higher than the Fed’s current inflation target), prices will double in 28 years. That may seem like a long time, but consider this. If you bought a home of $300,000 today and the home increases in value at a 2.5% annual rate, it will be worth over $600,000 when the loan is paid off.
Likewise, if someone is paying $2,000 in rent today and the same rate of inflation is applied, their rent would rise to more than $4,000 in 30 years. Thus, the cumulative effect of inflation is significant even when the rate of inflation is low. And even when the general rate of inflation is low, certain areas exceed the general rate. For example, the rate of rent inflation has exceeded the general rate of inflation for the past several years. This has made it difficult for renters to afford housing while those who own are not subject to the same increased inflationary factors.

Updated June 19, 2015
Daily Value | Monthly Value | |
June 18 | May | |
6-month Treasury Security | 0.08% | 0.08% |
1-year Treasury Security | 0.26% | 0.24% |
3-year Treasury Security | 1.03% | 0.98% |
5-year Treasury Security | 1.65% | 1.54% |
10-year Treasury Security | 2.35% | 2.20% |
12-month LIBOR | 0.734% (May) | |
12-month MTA | 0.168% (May) | |
11th District Cost of Funds | 0.680% (Apr) | |
Prime Rate | 3.25% |


With interest rates and home prices expected to climb in the next year, the financial penalties of delaying or forgoing a home purchase in today’s market have become very steep, according to the inaugural Opportunity Cost Report released by realtor.com. The report examines a wide range of factors, including the long-term financial impact of owning versus renting a home, the likely monetary gain renters forego in waiting to buy and the financial benefits of homeownership by market. “Current market conditions give buyers the opportunity to build substantial wealth in the long-term, compared with renters and later buyers, in advance of the projected increase in interest rates and continuing price appreciation,” said Jonathan Smoke, chief economist for realtor.com. “The problem is inventory is low, which has many would-be home buyers –especially first timers – standing on the sidelines and missing out on potentially material financial gains.” Nationally, the estimated wealth an average buyer would accumulate over a 30-year period based on today’s dollars totals $217,726. Although some markets are more buyer-friendly than others, national data shows homeowners see significant financial benefits as compared to lifetime renters. In 88 percent of MSAs, buying a home produces a financial benefit of at least $100,000 over 30 years. Source: HousingWire
The first-time home buyer share of home purchases in April surged to its highest level in more than four years, the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey said. Tom Popik, research director for Campbell Surveys, Bethesda, Md., said the increase was spurred in large measure by a reduction in the cost of FHA loans; FHA recently reduced its annual insurance premium for FHA loans by 50 basis points to 85 basis points. “Cheap FHA financing looks like it’s making first-time home buyers come out in force,” he said. The report said first-time home buyers accounted for 37.6 percent of home purchases in April, up from 34.3 percent a year ago, based on a three-month moving average. The last time the first-time home buyer share of home purchases was above 37.6 percent was in August 2010 (40.0 percent). At that time, the annual MIP on FHA loans was 55 basis points. The report also noted 42.2 percent of purchases by first-time home buyers in April used an FHA loan, up from a low of 34.2 percent as recently as last September. FHA financing for first-time home buyers has taken market share from the government-sponsored enterprises and the Department of Veterans Affairs in recent months. Popik said while first-time home buyer activity has been helped by a reduction in FHA premiums, the first-time home buyer share of home purchases tends to peak each year in June or July, suggesting that the share could continue to climb. He said demand from first-time homebuyers is strong, with many seeing owning a home as cheaper than renting. Source: Mortgage Bankers Association