How can the price of a house go up but actually cost less?

It sounds like the riddle a 10-year-old might ask, but hear me out. The average Texas home price is $218,900 … an increase of $19,200 over August 2008. Hard to argue that’s more affordable, except …

Mortgage rates make a huge difference

In August 2008, you could get a 30-year fixed-rate loan for about 6.5%. Right now that same loan carries a ridiculously low rate of 3.6%.

Plug the 2008 figure into a mortgage calculator, and your payment on the average-priced home is $1,264 a month. Even with the higher average home cost today, though, the 3.6% mortgage rate brings your monthly payment down to $995.

All of a sudden, the $218,900 home … the one priced nearly $20,000 higher today than four years ago … costs $269 per month less.

The lender gives you more loan per dollar

Another way to look at the power of low interest rates: For each dollar you pay per month on a 3.6% 30-year loan, you get $220 of purchasing power. At 6.5%, it’s only $158 per dollar of loan.

So $800 a month buys you almost $50,000 more house, simply because of the difference in interest rates.

Other variables do come into play, like taxes, insurance, and downpayment, but these examples illustrate why you might want not want to wait long to talk with  Julie about buying a home.