We are in the midst of a housing boom or bubble - depending on your point of view. In the expensive coastal area where I live housing prices have soared but now seem to be topping out. I see some houses sit on the market for months (or longer). In this climate I again revisit whether it would make sense for me to buy a condo that is equivalent to the apartment that I rent.

My monthly rent is $1100 for a 700 SF apartment. There is a 700 SF condo down the street selling for about $265,000 making for a nice comparison.

I figured that buying this unit with a 5.44% (average 30 yr fixed rate from bankrate.com) mortgage and 20% down would cost me about $1020/month (Here I am assuming I will own the unit for 5 years, there will be no appreciation, no selling costs, and no special assesments). I figured I would get all the tax deduction and this would be worth about 30 cents on the dollar.

It looked like buying would make a little more sense till I took into account the lost income investment income on the down payment. Assuming I could scrape the 53k for the down payment together (a big if) by buying I would miss out on after tax investment income of about $125/month (assuming I bought a 1 year CD from Corus Bank - these yield a shade better than 4% these days. So now renting looks a little better.

If rates nosed up even to 6.5% I would probably not be able to sell the unit for what I paid for it. Also please note that condos are sprouting up in my area like weeds. Bottom line: $380 bucks per foot for a 35 year old condo does not leave a lot of upside.

-fgmortgage calculator