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Buying puts money in your pocket in long run even without equity gain

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POSTED March 26, 2011 3:00 a.m.
What is the better value: Three bedrooms, one bathroom with 986 square feet of living space for $720 a month or three bedrooms, two bathrooms with 1,012 to 1,296 square feet of living space for $855 a month?

It’s a no-brainer — or at least should be.

That is why long-time Realtors are working overtime to educate people about the Manteca housing market especially renters with relatively low debt load and fairly decent credit.

The $845 a month figure represents renting an apartment in Manteca. The second figure represents buying with 3.5 percent down on a home (the example just closed escrow at 645 Fir Street for $94,900) assuming a fixed FHA loan at 5 percent and includes property taxes and all insurance, mortgage and otherwise.

Yes, when you own you will have to pay for your own sewer, water and garbage. Even if that adds $85 a month, your monthly housing cost is $805 a meaning you are paying $50 extra a month for the privilege of owning instead of renting. But that’s before income tax advantages are factored into the equation. Even in the worst-case tax advantage scenario, the $50 comes off.

In a year’s time you can pay $10,260 to a landlord or pay $9,660 to own your own home with city utilities covered

Buying means no need to worry about rent increases.

That apartment back in 1993 — the same time homes in the Fir Street neighborhood sold for around $117,000 — rented for $450. The odds are the apartment 15 years from now will easily rent for $1,300 while the housing payment for the Fire Street home using the financing example that closes escrow this month will remain at $730 — plus any tax increase at a 2 percent annual cap when values start moving upward again.

So who cares if there is no major equity gain — even though that will happen again? Your housing costs will go down in the long run if you buy today. That’s better than equity growth since it puts actual money in your pocket.
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