Virginia Beach Home Prices - Virginia Beach Neighborhoods

Before even considering finding the right home or the right neighborhood, most home buyers must be convinced that the benefits of home ownership outweigh the risks. Until three years ago, this was a no brainer. Home prices in Virginia Beach had made new highs every year for 50 years. There seemed to be very little risk. Today we see Virginia Beach home prices as much as 30% off the 2006 highs. Clearly the risk was there, we simply weren’t aware of it.

I am optimistic for three reasons. First, homes are about 30% more affordable than they were three years ago. Everybody likes a bargin and nothing says “On Sale” like a $100,000 price drop.

Interest rates are at an all time low. Three years ago a $300,000 loan at 6.25% would cost you about $2000 per month. Today you can borrow $355,000 for the same price at 4.75%. This is significant in the grand scheme of things for obvious reasons. Take yourself back to 2006 and imagine a $300,000 home and a $450,000 home.  Let’s say you qualified for a 100% VA loan for $300,000 (principle and interest of about $2000 per month). You would rather have the $450,000 home but it was well out of your price range. Now bring yourself back to the present. That same $450,000 home is selling for $355,000 and it can be yours for… you guessed it! $2000 per month, principle and interest.

You can buy 50% more home today than you could three years ago for the same price. This is very significant and is overshadowed by the fear in the market place.

The third reason I am optimistic about home prices is because I think inflation will rear its ugly head. Now, I am no prognosticator. Nor am I an economist. But I have listened to enough people much smarter than me say that inflation down the road is probable based on the amount of money being forced into the system. Inflation is the reason a $200,000 house in 1980 is worth $1,000,000 today. The value of the homes won’t necessarily be worth more relative to other goods in the economy, but the price of everything will be more. A gallon of milk will double in price. Our incomes will double in price. And yes, our houses will double in price. This has the effect of chopping our mortgage in half.

If my math is wrong, please feel free to correct me. Perhaps the price of a gallon of milk will double and everything else will stay the same. As I said before, I am not an economist.

If you are making twice as much money 10 years from now, it is safe to assume a $4000 per month mortgage would be the same burden as a $2000 mortgage today. Today a $4000 mortgage will buy you a $700,000 home, which was a $1,000,000 home in 2006.

Stay with me here. If we see inflation, as some predict, and you buy that home that was $1,000,000 in 2006, it will cost you the same in ten years as a $300,000 home did in 2006. This is based on a combination of the housing slump, low interest rates and inflation.

At the end of the day, people buy homes because they want a place to call their own. Every morning I sit in my favorite leather chair and drink a cup of coffee. And every morning I feel the pride of ownership when I look across my living room and out into my backyard. Owning a home is more than an investment. Having a place to call your own seems to be a fundamental human need. You may not need a $1,000,000 home, but if it only cost you the equivalent of a $300,000 home in 2006, would you pass it up?