Rent or Buy in Watsonville?

Rent or Buy in Watsonville?

In 2007 - 2009, we saw housing prices come crashing down like they never have, at least in our life times. Home prices across the state of California declined 40%. The last two years, prices have bumped along the bottom as buyers cautiously re-enter the housing market.

Among people I talk to, the mood of buyers has changed a lot since 2005. No one is expecting to double their money in five years, but they still have to live somewhere, right? So for many people, the issues become more personal and immediate. Do I want to have to ask my landlords’ permission to paint the bathroom a different color, or to put up a basketball hoop? Do I want to live in my own place? Will my monthly bills go up or down? Is it safe to buy a house and can I swing it if I wanted to?

Only you can answer the personal questions, but I found a great tool for figuring out the financial piece of it. The Department of Housing and Urban Development or HUD has a very nice rent vs. buy calculator on their website at:

http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH

I plugged in an example of a 4 bedroom home in Watsonville. Purchase price $350,000, loan rate 4%, 3.5% down payment ($12,250) vs. rent of $2200 per month. To be ultra-conservative I said housing prices will stay exactly the same as they are today, no appreciation over the next 10 years.

The first dramatic difference is that your monthly payment drops to $1,274, but there are many other savings that you might not think about. There is a hefty tax deduction. Rent will increase over time. Your mortgage payment stays fixed. Over time you are paying down the loan.  Over a 10 year period, the overall savings amounts to $140,787. If you were to assume even a 2% increase in home prices, your total savings would be $207,796 over the same 10 years.

It is something to think about. Where else are you going to accumulate that sort of savings? What will that mean to you and your family? Take advantage of the savings if you can. Talk to a lender to see if you qualify. You will be worlds ahead a few years from now.

Note: The calculator above uses these items in its calculations: private mortgage insurance, homeowner's insurance cost, loan closing cost, cost of selling a home, property tax, homeowner's tax saving, and rent increases. Calculator results are estimates only.

Mike Young is a Broker Associate at Thunderbird Real Estate in Capitola.

Mike Young - Thunderbird Real Estate
Realtor, Broker Associate, MBA, SFR, CDPE, HAFA
(831) 234-1545
License 00952966
mike@MikeYoungProperties.com