The return of housing affordability in Washington- from a lenders perspective

So I posted an article from NAR on Facebook and someone commented what if values drop another 10% and here is my answer.

Ok- Let’s run the numbers at a 10% drop the first year of ownership but a conservative 2% year after year 2-5 and say we have a $200,000 purchase with 10% down at 4.5% on a Lender Paid Mortgage Insurance (LPMI) program with a $180,000 loan today we have a payment of $912 and $235 for T&I vs. rent at $1250 and rental insurance at $25.00.

So $1275 to rent vs. $1147.00 to own assuming a 28% tax bracket is $241 per month benefit with another $237.00 going toward principal reduction. So in a five year period with a conservative 2% rental appreciation you end up paying $79,561.00 in rent and $68,822 in mortgage but $15,916 goes toward principal and $13,974 goes toward tax benefit making a net cost to own at $38,933 with a net savings of $40,628.

Now with the 10% drop the first year we are still at $196,748 but our loan balance is $164,084 so we have $32,664 in equity after five years! BOOM- its time to buy before rates go up!