Is There a Bubble?
Nearly a full third of households are still renting....but if you are one of them, you could be paying a hefty price. All the talk of the 'housing bubble' in recent years has led many to put off purchasing a home. In reality, there isn't a housing bubble.

The real key to a healthy housing market is the job market, not interest rates like we are often led to believe. While an increase in interest rates may affect a monthly mortgage payment, it is likely not significant enough to deter someone from buying the home of their dreams. However, if someone feels their job is in jeopardy, it would likely impact their decision to purchase a home. That being said, Colorado is projected to have a 2.9% job growth in 2006 ~the 3 highest in the nation. In addition, we are projected to have a moderate home appreciation of 5.9% in Colorado this year. Although some gains in recent years may start to cool down, price declines are highly unlikely in these areas and it will not impact us.

BUY vs. RENT
Cost of Renting				Financial Benefits
Monthly Rent	$	1,500		Equity in Home		$	20,500
Annual Rent Increase		5%		5% Annual Appreciation		$	83,000
Total Cost for 5 Years	$	99,500		Total Financial Benefit		$	103,500
Cost of Owning				Overall Benefit of Purchase
Home Price	$	300,000		Total Rent Cash Flow	$		99,500
Monthly Payment*	$	2,100		Equity in Home	+$		20,500
				Home Appreciation	+$		83,000
Total Cost: 5 Years	$	125,500		Housing Expenses	-$		125,500
Tax Credit for Interest	$	22,500		Tax Credit	+$		22,500
Cost after Credit	$	103,000		Benefit of Purchase	$		100,000
*Monthly payment includes payment, interest, taxes & insurance

The Cost of Renting
So what is the actual cost of waiting to buy that new home? Let's look at the example above of a Rent vs. Buy scenario over a 5 year period. The cost to rent is almost $100,000! The cost to own a home over that same time period is only $3,500 more after a tax credit (This scenario assumes a 25% tax bracket). This is equal to about $67 a week or $9.60 a day. In addition, the equity you build when you purchase a home combined with the average annual appreciation of 5% is equal to $103,500 over a 5 year time frame! When all is said and done, 5 years from now you'll have $100,000 more in net worth if you purchase rather than rent.

Let Uncle Sam Help
If laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits you derive from your new home purchase, you can simply adjust the amount of your with-holding. This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free! Visit www.irs.gov and search for the IRS withholding calculator. This handy tool can quickly show you the effect a change in withholding will do to your net paycheck. Remember to balance this with the expected refund and check with your tax advisor.

Don't be victimized by the bubble hype. Buying a home is a big step, but it is almost always one in the right direction!