One of the first questions most Realtors are asked when talking about real estate is with regards to the health of the market and how much longer it will remain stable.

In my opinion, affordability is what really needs to be considered. This is the concept of how well an owner can continue to make payments on a property now and over time.

For financed buyers, the cost of borrowing money is a huge factor in the discussion of affordability, and is just as important as the market value of the property.

Current data show real estate prices are at or above the previous pre-recession peak of 2006, and many believe this is a sign we are “back at the top” and “at the end of a cycle.”

While this might be partly correct, what people often forget is the cost to borrow money was much more expensive in 2006 than it is today. For example, in September 2006, the conventional 30 year-fixed mortgage was approximately at 6.5 percent. Today it’s around 3.5 percent.

On an $800,000 purchase with 20 percent down, that is almost $1,200/month difference in payment. Does this make you reconsider your beliefs about the market, its cycle and if it’s a good time to buy or not?

Let’s look at it another way. If you were just pre-approved from a lender based on current rate of 3.5 percent and a mortgage payment (principal and interest) of $3,700/month, that would afford you a property around $800,000. Contrast this with a 2006 rate of 6.5 percent, and you’d only be able to afford a $600,000 property.

Many play the real estate game and expect to make money with appreciation. The problem is, there are always those who get caught paying too much and with a payment that is not affordable. This is why the conversation should not be just about the price of real estate, but about affordability as well.

When considering if you can afford a property and monthly payment, ask yourself this: Will I be able to afford this if and when the market corrects?

Investing in real estate is similar to investing in stocks — your gain or loss is not realized until you sell. The last thing you want to do is be forced to sell your property in a down market because you took on a payment that was not affordable.

The Santa Barbara Association of Realtors urges readers to “Call your Realtor” and mortgage lender to learn about how to make smart and calculated decisions in regards to buying and selling real estate.

— Thomas Schultheis is with Berkshire Hathaway HomeServices California Properties, and can be reached at 805.729.2802 or