Friday, February 20, 2009

Is it a mortgage bailout or home maintenance?

Rick Santelli's rant notwithstanding, bailing maybe 9 million homeowners out of a mortgage jam doesn't seem that costly if you compare it to do-it-yourself projects around the house.

Financial planners and budget counselors I know generally recommend budgeting about 1 percent of your home's value for maintenance and repairs, plus about 2 percent more if you plan significant remodeling. That's between $1,970 and $5,910 for a national median $197,000 home, or $1,440 to $4,320 at Kansas City median prices.

Spending $75 million to clean up those 9 million shaky mortgages works out to a bit less than $1,140 apiece if you divide it among the rest of the nation's total 75 million homeowners who don't have troubled loans. It goes way lower if the nation's 36 million renters kick in too.

Now look at what the money potentially buys. Reuters reportsRick that a record 64 percent of recently surveyed homeowners report that nearby defaults have eroded their own homes' values.

Realty Trac found that 3 in 10 potential buyers of foreclosed homes expect to pay about half price for the property. Avoiding that has got to be at least as profitable as recouping maybe 85 to 90 percent of what you spend remodeling a kitchen or bath.

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