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.
Sure, if your time horizon is legitimately that long for the same place in the same location. IF prices decline, you are stuck for several years or more. You may decide 3-5 years from now that you want to take a job in another city or whatever, but you’re stuck. A lot of people talk themselves into believing that they plan to stay in the same place for “a long time” in order to justify overpaying today.
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.
You removed the principal paydown from your earlier calculation, then put it back here for equity buildup. Can’t have it both ways. Either you include equity in your monthly nut, or you don’t.
Also as someone else stated, your initial numbers don’t work. Maybe you took a tax deduction for the entire PITI, but they don’t make sense.
