Being that we are a Real Estate Brokerage, Presidio should be encouraging everyone to buy a home correct ? First of all, I want to make it perfectly clear to everyone, buying a home is not the path to riches. But buying a home is a great way for people to build equity and learn how to do lot’s of cool things, like installing an angle stop valve, using a bow saw, or painting a wall. Prospective home buyers should take their time and find a home that they can grow with.
Home prices have in some segments of our local market, fallen to a point where it makes sense to buy again. Let’s take a look at a typical home in the West Ventura County area. This includes the cities of Thousand Oaks, Newbury Park, Moorpark and Simi Valley. A typical 3 + 2 home with 1600 + square feet is going to rent for $2200-$2500 depending on the city, location and amenities. What will buying get for the same price ?
Now let’s look at purchasing. If you bought a home for $450,000 with 10 percent down payment and closing costs your out of pocket expenses would be roughly $45,000. Your total monthly payments would be $2869 including taxes, insurance and mortgage insurance assuming a 30 year fixed rate loan at 5%. Your monthly tax benefit would be roughly $533 assuming you are in the 25% tax bracket, the net effect is a $2336 monthly payment. Add on top of that the +/- $493 per month going to pay down the loan principal your net-net monthly payment is $1844.00. Download the complete Buy vs Own analysis.
Interest rates – which are at historically low levels. In a low demand market rates play an important factor. If we use the example above, 5% interest rate and increase this to 6%, the payment would increase $257 per month to $2458. In order to have the same monthly house payment the price of the home would need to fall $40,000. Lets face it most people care about what their payment is. It is safe to say interest rates shouldn’t be going up anytime soon but one never knows. But if they do those who sat on the sidelines waiting for prices to fall will be left holding the bag.
Maintenance & Upgrade Costs- One thing many new homeowners understimate is the cost of home maintenance. If you buy an older home you will want to fix it up and it will need maintenance. If you are handy this will cut down labor costs. But new homeowners should factor in $2000 per year for maintenance at a minimum. A general rule for home improvement projects is to take material costs and double it to get the total costs of the upgrade.
Now is an excellent time to look into buying a home. Presidio Real Estate Services can help you evaluate your options and help you get started.