A household with two full-time workers each making minimum wage - $8 an hour – could afford to buy a $115,000 home if they have no other debt load and have the means to come up with $6,000 or so for down payment and closing costs.
That translates into roughly an $880 a month housing payment for mortgage insurance, homeowners insurance, property tax, and mortgage. The real question, though, is should such a household buy a home?
There is little doubt you will not be seeing affordability at this level again for a long time once things start improving in value sometime in the next few years.
There are people who will tell you that you’ve got to act before April when the $8,000 federal tax credit will disappear that essentially means you can get into the home when all said and done and the IRS settles with you and actually make a couple hundred dollars plus on the deal.
Then there are those who will tell you that the FHA down payment will go up from 3.5 to 5 percent sometime in the coming months plus sellers will have their ability to cover closing costs severely reduced.
All signs say buy buy, buy. Right? Wrong.
If your plans aren’t to stay put for four or so years, the deal could end up costing you money.
For $880 a month, there were five homes listed in the Bulletin in Manteca and Lathrop with two bedrooms you could rent for that amount of money. Some include utilities. Many have been just recently purchased and remodeled by investors.
Out of the 17 duplexes or town houses for rent, 15 were under $880. And you can rent almost any two-bedroom apartment in Manteca for less than $880 a month.
You will increase the money in your pocket through tax deductions against income but at the same time you’re on the hook for improvements or any repairs. Then again, a tax deduction isn’t dollar for dollar as you have to spend three to four times as much of the value of the dollar deduction to receive it.
Even factoring that in, is it worth it to buy knowing the odds you will probably sell n four years? On an $115,000 home, it would have to go up in value to at least $125,000 or so to recover closing costs and other expenses related to the transaction.
What if you household income is even bigger and in have no yearning to pack up and move away from Manteca, Lathrop or Ripon for at least 10 years? Financially, buying may make sense to you but there are other issues such as upkeep of the actual structure and yard.
If that isn’t your bag but you still want to have fairly level housing costs renting could be a smart option.
It depends, though, on who you rent your home from.
There are a number of local investors who have taken advantage of the foreclosure market to buy and fix up homes to rent. They have set rents at a level where they still have a positive cash flow.
If you find someone who is looking for a long-time tenant they are more apt to keep rents low in order to keep you put. It costs landlord money when a house is vacant and even more when they get destructive tenants.
There are instances every week where renters from local investors who give notice they are moving. When they are asked why they will say it is because they’ve found another home for less per month. More often than not, the local landlord will knock some money off the rent in exchange for a year’s lease to keep tenants in place. It may not quite match the rent of the other homes but most people don’t move figuring the remaining difference in monthly cost isn’t worth the hassle of moving.
If you establish a long-term relationship with such a landlord you may find your rent is still below market 10 years from now.
Of course, that is a risk just like anything else as the opposite may happen.
It also goes without saying that the per month difference between apartment rents and an actual free-standing home with a yard hasn’t been this narrow for decades.
All things considered it is definitely a renters’ market and should stay that way for the next two to three years.
Buying only makes sense if it fits your lifestyle and your expectations of whether it is a home where you will have no problem staying for at least the next four years.
That translates into roughly an $880 a month housing payment for mortgage insurance, homeowners insurance, property tax, and mortgage. The real question, though, is should such a household buy a home?
There is little doubt you will not be seeing affordability at this level again for a long time once things start improving in value sometime in the next few years.
There are people who will tell you that you’ve got to act before April when the $8,000 federal tax credit will disappear that essentially means you can get into the home when all said and done and the IRS settles with you and actually make a couple hundred dollars plus on the deal.
Then there are those who will tell you that the FHA down payment will go up from 3.5 to 5 percent sometime in the coming months plus sellers will have their ability to cover closing costs severely reduced.
All signs say buy buy, buy. Right? Wrong.
If your plans aren’t to stay put for four or so years, the deal could end up costing you money.
For $880 a month, there were five homes listed in the Bulletin in Manteca and Lathrop with two bedrooms you could rent for that amount of money. Some include utilities. Many have been just recently purchased and remodeled by investors.
Out of the 17 duplexes or town houses for rent, 15 were under $880. And you can rent almost any two-bedroom apartment in Manteca for less than $880 a month.
You will increase the money in your pocket through tax deductions against income but at the same time you’re on the hook for improvements or any repairs. Then again, a tax deduction isn’t dollar for dollar as you have to spend three to four times as much of the value of the dollar deduction to receive it.
Even factoring that in, is it worth it to buy knowing the odds you will probably sell n four years? On an $115,000 home, it would have to go up in value to at least $125,000 or so to recover closing costs and other expenses related to the transaction.
What if you household income is even bigger and in have no yearning to pack up and move away from Manteca, Lathrop or Ripon for at least 10 years? Financially, buying may make sense to you but there are other issues such as upkeep of the actual structure and yard.
If that isn’t your bag but you still want to have fairly level housing costs renting could be a smart option.
It depends, though, on who you rent your home from.
There are a number of local investors who have taken advantage of the foreclosure market to buy and fix up homes to rent. They have set rents at a level where they still have a positive cash flow.
If you find someone who is looking for a long-time tenant they are more apt to keep rents low in order to keep you put. It costs landlord money when a house is vacant and even more when they get destructive tenants.
There are instances every week where renters from local investors who give notice they are moving. When they are asked why they will say it is because they’ve found another home for less per month. More often than not, the local landlord will knock some money off the rent in exchange for a year’s lease to keep tenants in place. It may not quite match the rent of the other homes but most people don’t move figuring the remaining difference in monthly cost isn’t worth the hassle of moving.
If you establish a long-term relationship with such a landlord you may find your rent is still below market 10 years from now.
Of course, that is a risk just like anything else as the opposite may happen.
It also goes without saying that the per month difference between apartment rents and an actual free-standing home with a yard hasn’t been this narrow for decades.
All things considered it is definitely a renters’ market and should stay that way for the next two to three years.
Buying only makes sense if it fits your lifestyle and your expectations of whether it is a home where you will have no problem staying for at least the next four years.
