MAKING SENSE OF THE STORY FOR CONSUMERS

• The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent has declined to $256.  In some areas, the difference is as low as $100, according to the study.  The last time the price gap was that close was in 1993, when it decreased to $264.
  
  
• The study, conducted by Marcus & Milichap Real Estate Investment Services, used median prices for the last three months of 2009 and calculated mortgage payments by assuming a 10-percent down payment and a 30-year fixed loan at 5.07 percent.  It also assumed borrowers paid for private mortgage insurance and didn’t include repair costs and tax benefits.
  
  
• Although the difference between monthly rent and monthly mortgage payments is at its lowest level in nearly 20 years, more stringent lending standards have made the home-buying process more challenging.  Home buyers can prepare by ensuring their credit reports are up to date and saving for a down payment of at least 20 percent.  Borrowers putting down less than 20 percent likely will have to purchase private mortgage insurance.
  
  
• Owning a home has significant tax benefits, including deductions for property taxes and loan interest.  Homeowners also can enjoy building equity and creating a means of forced savings as they pay down the principal on the home.
  
  
• Although home buyers should not focus solely on future home price appreciation, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) over the last 40 years, homeowners who purchase a median-priced house, live in it for at least five years, and sell it at the then-current median price, have averaged an annual rate of return of more than 11 percent.

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