Thanks for all the responses so far. Let me summarize:
1. Negative equity since housing price is going down.
Let’s say I’m going to stay in this condo for a long time and I’m going to ride out the ups and downs.
2. Opportunity cost of investing the $12,000 down payment.
I know someone suggested 10% annual return on investment. That seems optimistic. Let’s use a more realistic number, say 7%. Again assuming the 34% income tax bracket. The $12,000 will grow to $188,507 after 10 years. However, if you buy the house, you are also adding equity with every mortgage payment. Your equity actually grows to $190,555 over 10 years. Again, buying comes out ahead. I know some of you are going to say your equity is going to decline significantly for the next few years, but that is not a sure thing and also see #1 above. Plus if it’s cheaper to buy today, maybe it’s not overvalued.
3. Not taking the standard deduction into consideration.
Let’s say I already itemize. The state income tax along would make me itemize my return.
4. Not taking maitenance into consideration.
This is true, but this is a relative new condo and HOA takes care of all the exteriors. You may need to change a few bulbs and fix some leaky pipes. Let’s add $100 to the monthly expense to cover this. Note in my original post, I didn’t take rent increase into consideration. Buying still does not seem a bad idea.
Come on guys! You need to do better than this. 🙂
