Since home prices for the Twin Cities metro have fully recovered and then some, it’s tempting (and even somewhat logical) to assume that monthly mortgage payments are also at all-time highs. That assumption would be entirely inaccurate. But it makes so much sense! If the median home price is at an all-time high, the monthly mortgage payment on that median priced home must therefore also be at an all-time high. Nope. Still false.

What this assumption fails to account for is of course mortgage or interest rates. The last time prices were this high, in 2006, the 30-year fixed mortgage rate was about 6.5 percent. In 2017, rates are averaging around 4.0 percent. That’s where this all-too-common assumption falls flat on its face.

The monthly payment on the median-priced home in 2006 was $1,715, but is only $1,498 in 2017, thanks to rates being 2.5 percentage points lower (6.5 vs 4.0). The median home price, however, has now reached $247,000 compared to $230,000 in 2006. So while affordability has declined since 2012, it still remains above 2004-2007 levels. In other words, despite prices being higher today than in 2006, monthly payments on purchased homes are still below where they were during the housing bubble.

From The Skinny Blog.