Mark Simons: Mortgage Rate Update and buy, buy, buy!!!
By: Mark Simons
June 3, 2010 ( FreeRateUpdate.com) – Rates for our happy POV* came out and stayed put with none of the Major Wholesale Lenders re-pricing one way or the other. Conforming rates at 4.500% and High Balance Conforming at 4.75%. Super Jumbos at 5.375%. As always, gossip, lies, innuendo and loan scenarios are welcome at lololoans@yahoo.com
In THIS corner…at about three years old, from all over the USA, RENT! And in this corner, surviving the Mortgage Meltdown of about the same age is BUY! Let’s get readdddddy to rrrrumble! So the debate goes on. Real Estate Megasite Trulia has just fanned the flames with the tried and true Rent vs. Buy comparison, but also has a nifty little breakdown of what Cities come out at which end of the debate. To simplify, they have come up with an index or formula to supposedly make this easier to figure out: (from the Wall Street Journal on this report)
The cross-over point is about 15 times annual rent, the company believes. In other words, as a rough rule of thumb, homes are probably fairly valued in a city when they cost about 15 times a year’s rent. So, for example, if you’re paying $10,000 a year to rent a place, think twice about buying a home that costs more than $150,000
Well that’s all well and good except…you have to factor in the Metro Area as well. Ok so yeah, $150K will buy me a nice single family home in Tulsa, but in the large Metro Areas like San Francisco, all this will get you (if you are lucky) is a small Condo. You MUST remember to factor in the Homeowner’s Association Fees which normally do not show up on all these spiffy “rent vs own” calculators. This additional expense may be the “deal breaker” for Renters looking to buy as it will push their debt-to-income ratio over the top.
Bottom Line? BUY dammit! I don’t make any money off Renters! Seriously though..look at the big picture. Rates are low and can probably only go up from here as we slide our way into turning into Greece. Prices are low. Inventory is high. It is still a Buyer’s Market. Need I say more?
*POV = Plain, Old, Vanilla Home Loan: 30yr fixed rate, fully amortized, Single Family Home, Owner-Occupied, at least 20% equity, slightly lower rates and fees for the Giants’ Matt Cain because he ROCKS.