COST vs. PRICE, what exactly is the difference?

KCM (Keeping Current Matters) is a great source for timely real estate information that helps prepare agents to assist and guide buyers and sellers.  This week they posted a blog that I felt really hit the nail on the head and I wanted to share it with my friends and clients in our Midtown Direct and neighboring communities.

We so often use the terms COST vs. PRICE, but what exactly is the difference?  As a seller, you will be most concerned about “short term price” or where homes values are headed during the next six months.  Buyers must be concerned more about the “long term cost” of the home more than price.  Here’s a little clarification….

Yesterday, KCM reported that the Mortgage Bankers Association (MBA) is projecting mortgage interest rates will slowly increase over the next 12 months.  And earlier this week, they indicated that experts are projecting home prices to increase as well over the next year.

This will have an impact on a buyer’s mortgage payment as home prices increase over the coming months.  To better explain, we’ve put together this simple demonstration on a home selling for approximately $600,000 today:

Impact of Interest Rates on Payments

PRICE                     $570,000                 $600,000            $630,000

                                -5%                                                                            +5%

What is comes down to is return on investment or where do we stand to gain the biggest profit and the greatest long-term benefits.  And that’s where my team comes in – our years of experience and understanding of the housing climate can help both buyers and sellers navigate the market and get the biggest bang for their buck.