Buy or Rent?

There was an interesting article in this morning's newspaper, Money Section, about how many tenants are finding it more attractive to purchase rather than rent. The article used a formula and I thought it might be interesting to see where Racine fit into this. In a previous post I stated that the median price of a home in the City of Racine was $93,000. Using that figure and the formula outlined in the article, here are the relevant figures I calculated for Racine:

• Purchase price: $93,000;
  
• Downpayment: 10% ($9,300);
  
• Monthly Principal and Interest payment (based on an $83,700 mortgage at 5.2% for 30 years) $459.61;
  
• Real estate taxes (Current city mil rate of $21.805/$1,000 and assuming an assessment of $93,000 with the total annual tax bill being $2,027.87) $168.99;
• Private Mortgage Insurance of $36.27
• Homeowners insurance of $30
  

The monthly total is $694.87. I'm not sure what the median rent is in the City but I would guess it to be somewhere between $600 and $700 per month.

If all of the above is accurate, you could buy a median priced home in Racine for about the same as renting an apartment. Now remember that this assumes you have $9,300 for a downpayment and other dollars needed for closing costs, you feel comfortable in your employment situation and, of course, that you realize that homeownership is not for everyone. But it is an interesting time to be considering a home purchase (and remember, if you have not owned a home in the last 3 years and close before December 1, you could get a tax credit of up to $8,000). Finally, keep in mind that the real estate taxes, mortgage interest payments and some other charges may be tax deductible where rent generally is not. Interesting stuff and it seems to show that Racine compares very favorable with the rest of the country.