Are Monthly Mortgage Payments Really 40 Percent Lower Than In 2006?

• November 10th 2011

by Shilpi Paul

Yesterday, Housing Wire reported that the median monthly mortgage payment in the U.S. is currently 40 percent lower than it was in 2006. David Stiff, chief economist at financial research firm Fiserv, noted that the average monthly payment is “now $700, compared to $1,140 in 2006.”

Falling home prices and record low interest rates have certainly led to more home affordability across the nation in the past year, but UrbanTurf was curious if the dramatic 40 percent payment difference was true in DC, a city where home prices have (more or less) held their own. To determine this, we went on the hunt for properties that sold back in 2006 and then again this year.

We found a house at 5329 Belt Road in Chevy Chase that sold in May 2006 for $699,000 and then again this past summer summer for $669,000. Assuming that the buyer put 20 percent down and used a 30-year mortgage, here’s what we calculated:

In May 2006, interest rates were at 6.3 percent, so the monthly payments on a home priced at $699,000 would be $3,461. This past summer when the home on Belt Road sold again, interest rates were not as low as they are now, but at 4.6 percent, low by historical standards. So, the monthly payments dropped to $2,748. While not 40 percent, this property’s monthly payment is 20 percent lower than it was back in 2006.

Based on our research, 20 percent seems to be the DC discount. We found a one-bedroom, one-bath condo up in Tenleytown that sold for $445,000 back in the summer of 2006 when interest rates hovered around 6.6 percent, making monthly payments approximately $2,270. This past June, the same unit sold for $434,000 when interest rates were at 4.5 percent, which means that the monthly payments ($1,760) were 22 percent lower than in 2006.

While not totally scientific, hopefully this quick analysis provides some perspective on how DC stacks up to the rest of the country.

This article originally published at https://dc.urbanturf.com/articles/blog/nationwide_mortgage_payments_dropped_40_percent_since_2006/4554.