We’ve been fortunate. For decades, we’ve not seen inflation like we’re currently experiencing. Inflation has a suffocating effect on our economy and our individual financial health. Here is a stark example of what is currently happening in the housing market.
My first starter home was 960 square feet. According to builder.com, the new average starter home is 1800 square feet or less and consist of three or less bedrooms. For the sake of an easy example, so let’s just say a starter home is 1000 square feet, to be frugal. In 2020, the average cost per square foot was $122. In 2022, it is $222. An increase of almost 82%. For a home loan mortgage in 2020, the average rate was 3.10% for a 30-year fixed mortgage. Today, according to Bankrate.com, the average rate is 7.32%. Using an online mortgage calculator, we can quickly compare the monthly principal and interest payments.
2020: $122,000 @ 3.1% => $521/month or $187,560 over 30 years
2022: $222,000 @ 7.32% => $1525/month or $549,000 over 30 years
The difference is staggering. It greatly reduces our ability to purchase goods and services and will have a similar crippling effect on the job market.
There is no quick fix for this. Our standard solution of adding cash to the market has been its primary cause. In the meantime we will need to find ways to save on expenses when we can. Look for upcoming posts with cost-saving steps for every household.
Thanks for reading!
And remember to take the next step…
Mitch
PS: I’d love to hear any cost-saving tips you may have as well. Also, please Like and Share this page and posts. The more thoughts we can get, the more we can help. Thanks!