Tuesday, August 4, 2009

Housing Is Strengthening; Remember The Economics Of Homeownership

The positive real estate numbers don't surprise me one bit. I believe it is important to keep in mind that in this country, homeownership is a widespread goal, especially when you have children. Now it's a goal that has once again become achievable, given the decline in house prices, the decline in mortgage rates and, yes, the government tax credits.

In many areas around the country you can actually get a pretty decent three-bedroom, 2,000-square-foot house for, oh, about $400,000 let's say. Probably has a big lot. A major city is probably 20 miles away, and most of the jobs are in the suburbs anyway.

Let's take a look at the economics of ownership:

$400,000 with 20% down yields a mortgage of $320,000. A 30-year fixed mortgage would cost a qualified buyer about 5.3%. That yields a payment of $1,777. Add (for example) $375/month for property taxes, about $100/month for insurance, and your payment is about $2,250 a month. After taxes, that's under $1,600 per month.

Truly affordable, and you are no longer paying rent, which is probably not much less anyway.

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