there is another very interesting angle to that article, which shows how the current real estate financing market (i won't call it a bubble <g>) is creating very unsound decisions and propogating mal-investment across the economy.
the article features a Ms. Tongela English, a 31-year-old single mother of 2. she makes $42k a year. she is living so close to the edge that she can't scrape together the down payment on a $148k home.
she was paying $700 a month for rent. now she has a $1060 monthly mortgage payment, which is scheduled to go to $1260 a month in two years. remember now, this is a woman who couldn't come up with $7,400 bucks for a down payment, who has now increased her annual housing payments by $4,320 (and by $6,720 in two years). plus add in what, about $1,000 a year for real estate taxes.
yes yes yes there is a tax benefit. but not much of one. a single mother with two kids making $42k a year gets a pretty big standard deduction, and her marginal tax rate is pretty low. by my math if she kept renting she'd pay $6,127 in federal income taxes. on the other hand, with $11k of annual real estate interest, and $1k of annual property taxes, her tax bill now falls to $4,078 a year, or a drop of $2,049 (i just quickly put some numbers in TurboTax to do this math; please correct me if i'm wrong).
so net net, she's paying out an extra $5,320 a year ($4,320 a year extra monthly payments plus $1,000 real estate taxes) while saving $2,049 in taxes, for a net out of pocket expense of $3,271 annually. in addition, she now has to pay for upkeep, for leaky roofs, new paint jobs, etc. let me remind once again, this was a woman who has so little spare income she can't come up with $7 grand for a down payment.
this is the BENEFIT of home ownership, especially for low income Americans??
perhaps one of the real estate apologists / brokers on the thread can eloquently explain to me how this poor woman is better off by OWNING her home, and is not simply being financially raped by the various charlatans who stand to make a fee on her real estate transaction.
Cheers |
