Little is more important to many people than their home… and few things are more important to the economy than homes and household formation.

The average American gets married around age 25-26. The first child comes along about two years later. This household buys its first home around age 33 and buys their largest, trade up home around age 43. During these years, our average family will spend more and do more for our economy than at any other time in their economic lives. (Data from Clayton E. Tucker-Ladd’s, Some Facts About Marriage and U.S. Dept of Labor Consumer Expenditure Surveys.)

The single largest cost to our average household is the mortgage interest they pay during their lifetimes. Low interest rates, offer an average family the opportunity to significantly reduce this cost and channel the monthly outlet saved into long-term savings or the opportunity to move up to a bigger home.

To put this in perspective, consider that an 8%, 30-year mortgage will cost a consumer approximately $164,000 in interest per $100,000 borrowed. Reduce that interest rate to 6-½% and the interest cost falls to $127,000—a savings of $37,000 over the life of the loan. Take this a step further and invest the monthly payment difference of $101 into an investment earning 8% for the thirty year life of the mortgage, and the result is $150,000 of accumulate wealth at the end of the thirty year period. Or, if they prefer, they can accelerate the payment of their mortgage by putting those savings back into principal.

Our first Baby Boomer President, Bill Clinton, and Congress gave us additional tax incentives for home ownership. Prior to 1997, gain from one home sale could be rolled over, tax-free, into a home of equal or greater value. This worked fine for the older, Bob Hope Generation, who tended to stay put in the family home.

But the next generation, the Baby Boomers—more affluent, more mobile, and more inclined to lifestyle changes—is reaching the time in their lives when they will want to trade the smaller starter homes they bought a few years ago for that trade-up home. Ultimately, they will want to sell their larger home and move to an island in the sun, taking with them as much wealth as possible from the home ownership.

Clinton gave them the tax break they needed, when he signed tax law changes that allowed a married couple the opportunity to keep up to $500,000, tax-free, from the sale of their personal residence, provided they have lived in that residence two of the last five years.

By trading up, they can continue to grow their wealth in their real estate. By continually raising the cost basis in their home, when they finally sell and become equity refugees in the sun, they will take with them a large amount of wealth.

The sharply lower interest rates allow our average family the opportunity to reduce their monthly outlays for housing, increase their investments for future retirement, and/or move up to a larger home to accommodate their growing needs.

Run, don’t walk, to your mortgage broker or realtor… you may not see rates like these again for a long time!