Long Term Owning Usually Beats Renting

Typically, a weak housing market corresponds with a strong rental market. If the rental market is strong in your area, it may indicate weakness in the local housing market, which typically favors Buyers over Sellers.

 

When you buy a home with a fixed-rate mortgage, you can lock in a predictable monthly payment for 15 or 30 years. That means the largest part of your housing costs, principle and interest, are fixed. For some people, that stability, along with the sense of community that comes from being a homeowner, is enough to tip the scales toward home ownership.

 

If the monthly cost of buying vs. renting is comparable, you may consider some related factors to help you decide. Use the mortgage calculator under the “Finance Tab” on our website to find out which sales price is equal to what you are currently paying in rent. For example, if you are paying $2600-$2700 in rent per month that is equivalent to the principle and interest payment on a $500,000 Loan (5% 30-year fixed rate). Getting pre-approved for the loan is Step One. Your interest rate may be higher or lower depending on the amount you put down and your credit score. Email or call us and we will connect you with our preferred lenders.

 

When you rent, your landlord receives any appreciation and tax breaks associated with owning the property. If you plan on any significant remodeling, buying may be also preferable to renting. We are here to help you decide which is best for you!

 

 

 

 

Uncle Sam wants you...to be a HOMEOWNER!

Wouldn’t it be great if the government kicked in some money to help make home ownership more affordable? Because of deductions on mortgage interest, property taxes and now the $7500 tax credit for first time home buyers, the practical effect is that the government is subsidizing your home purchase. In fact, home ownership provides three of the best ways to reduce your tax bill.

 

1)  Mortage Interest you pay can be deducted from you gross income to reduce your taxable income. For example, say you take out a $300,000 mortgage loan at 6% interest. You pay $18,000 a year in interest on that loan. That means your taxable income for the year is reduced by $18,000. If you’re in the 25 percent tax bracket that means a one-year tax savings of $4,500 (25 percent of $18,000)

 

2) Property taxes may also be deducted from your gross income, lowering your overall annual tax obligation. Property taxes are levied on homeowners in the US to pay for a variety of public services. You may see local tax rates between 1 and 2 percent of the property’s current assessed value, depending on where you live. Property taxes are fully deductible on your primary home, second home or vacant land.

 

3) New $7500 Tax Credit for First-Time Home Buyers. This credit may be going up to as much as $15,000 in the new stimulus package.

 

Several of our clients have called us this year to THANK US for their larger than normal tax refund. They had no idea how advantageous owning a home could be from a tax perspective, in addition to the many other benefits of home ownership.

Response to Client question re: Market in the California Bay Area

Here is my response to an investor’s question regarding market activity and pricing in the California Bay Area. I received this buyers question via my Plaxo (social networking) site. It will give you a general idea of the Bay Area market. As I mention below, Real estate is a local regional market. If you have questions on a specific city or neighborhood, please let us know.

 

It depends which market you are looking in to invest. Trends and data are different in each local/regional area. In the areas hit hardest with REO's (foreclosures) we are seeing sales volume increase. The prices in these areas have gone down 20, 30 and 40% from their '05 highs. There are now multiple offers and some go over asking. Prices are low...range from about $150K-$400K avg for a newer single-family home. Rents are stable. In the areas with good job infrastructure we have seen prices roll back about 5%-15%. There are some REO's (foreclosures) but not a lot. Houses tend to sit on the market for 3 months or more--it depends on how they are priced. The good priced homes go faster. Investors are out in the market now. There are 2 large funds purchasing $20MM-$50MM in housing inventory in Northern California. The bottom will be seen soon. Of course we don't know it is the bottom until it has already started to go back up. Investors feel that they get the best pick of the homes now even if the bottom is not for another couple of months.