Archive for the ‘buying vs. renting’ Category
Although rental news is not typically a topic I cover here I think it is a relevant topic, in light of all the investors who are purchasing income properties. I was curious to get the perspective of someone who is right in the center of the rental market, so I called my colleague Lee Arnold of Chamberlain Property Management, a property management company in North San Diego.
Established renters: Although landlords can effectively raise rents, and will still be able to find tenants (properties are still renting rather quickly, often with multiple applications submitted right off the bat), it costs the landlord to turn over units. On average it could amount to $5,000 in lost rents and vacancy time, and to prepare the property for the next tenants (repairs, painting, etc.). Many landlords have opted to forgo raising rents for the time being, in lieu of keeping the tenants they have in their properties.
New renters: Expect to see new rentals priced a bit higher than current tenants might be paying for similar units. In other words, if you are already a renter there is a good chance your rent may not go up, but if you are looking for rental property you may encounter higher prices. The higher end rental market is the only one not going up right now, and according to Lee Arnold that is likely because of people reassessing their goals. Higher-end rentals include those over $3,000 a month.
Another interesting fact that property managers are seeing is that 2 bedroom units are not renting as quickly as 3+ bedroom units. This is due to the smaller size of the two bedroom units, comparatively speaking.
If you are looking for a property to rent you may want to speak with a mortgage broker to discuss you budget and loan options. If you plan well, you may be able to purchase a home and pay less per month than you would pay in rent. Many recent articles have shed light on the fact that renting can be more expensive than buying, so make sure you are informed before you make a choice!
In case you were wondering, or if you have been sitting on the sidelines waiting to purchase a home in San Diego county, here is some fantastic news: housing affordability in San Diego reached a record high last quarter. Combined with other factors, it is an ideal time for buyers right now in San Diego, especially first-time buyers.
According to data published in the San Diego Union Tribune, 62% of first time homebuyers can afford to purchase a home in the county, the highest percentage going back to 2000. Affordability has tripled since 2006, when it was at an all-time low. Other factors come into play making the timing ripe for buying.
Inventory will likely rise heading into the Spring selling season, although we are still at low levels comparatively speaking. Homes that are already on the market will have more competition with inventory increases, making it a great time to negotiate with those sellers. I have seen a rise in inventory in the last month alone along the north county coast, and overall most sellers are listing their properties comparably.
Short sales and REOs (lender-owned inventory) make for great negotiation possibilities, as long as a buyer is willing to wait a while when considering a short sale. I also see lenders making a return to the market, which is a good sign for housing, but could be competition for buyers as more well-priced inventory makes it’s way to the market.
Loan Products give first-time buyers choices and can make a big difference in the down payment and affordability factor. FHA loans, for example, only require a small down payment, and is a fantastic product for those who qualify otherwise but do not have 20% of the purchase price laying around in a bank account. This reason alone is one of the strongest in the affordability equation for first-time buyers. As long as the buyer has a job and is not self-employed an FHA loan could be a good choice.
Rent increases. Rents have risen across the country and in San Diego county lately, and renting and buying are getting closer from a cost-perspective. This Fall rent increases ranged from 1% to just under 4.5% in the county, leading to more vacancies as well (many people are moving to the outskirts of the county in search of cheaper rents). For many first-time home buyers who do the math it can be enlightening– so if you are still not sure about a home purchase look at the numbers and see if it makes sense for you.
Realtors have been saying for some time that now is a great time to buy, mostly because of the theory that buying when in a down or slow market is a strong financial tactic. But the above points show that there are many factors in play that make this a great time to buy. If you need further information on the local North San Diego market please do not hesitate to contact me.
Since the founding of our country home ownership has always been a valuable goal to attain. People bought homes and stayed in them most of their lives, often passing them along to their children. Homes were an important part of our lives–where our children were raised, where we spent holidays, threw the first baseball on the front lawn with our children, taught them to bake in our kitchens, and measured their growth on our door frames. But today much has changed, or has it?
Lately there have been stories printed about an attitude shift away from owning a home, concluding that it simply is not as important as it used to be. Interestingly, a National Association of Realtors study found that 8 in 10 Americans still believe home ownership makes sense, and 63% of renters site it as a high or moderate priority. With all the press out there you may be wondering whether there is still value in owning a home. Let’s look at some of the benefits.
Ownership: When you own a home, even if you are paying a mortgage, it is YOURS. You don’t have to get permission to paint the walls pink, change the carpet or plant a garden (granted if you have a homeowner’s association you may have some restrictions as to the exterior of your home).
Savings. Paying your mortgage each month is like placing money into a savings account; if you plan to stay there a long time eventually the market will rise again and you will build equity. If you need to sell years down the road you will have money in your home. Making that payment every month also forces you to save money. On the other hand, renting puts that money into another’s pocket every month.
Protection from inflation. Your home protects you from inflation, even if only minutely. But historically speaking appreciation outruns inflation over time.
Sense of security and responsibility. Owning a home gives the owners a sense of security. You don’t have to worry about getting evicted if your landlord goes into foreclosure. You feel better about making payments each month on something that is your own. As long as you purchase a home that you can afford it makes you feel good to know you are paying toward ownership.
Sustainability. Home ownership is sustainable and if you buy smart (during a time when the prices are down, timing is ripe for negotiations, and interest rates are at an all-time low–hey, that sounds like NOW) your long-term investment will pay off down the road.
Taxes: Home ownership can be beneficial due to the mortgage interest deductions and other deductions. If you subtract these amounts from your mortgage owning can actually prove to be cheaper in the long run than renting.
Of course home ownership is not ideal for everyone. If your job involves a sufficient amount of traveling you may not be able to tend to the upkeep on a home. If you cannot afford a home of course it is wise to save money and wait until you can (although nowadays the lenders have pretty much made it impossible to buy a home if you are unable to afford it). If you have been transferred to a new state or city for job reasons I advise living there first for some time before purchasing, so buying a home off the bat may not be the best option in this case.
No matter how you look at it, it seems to me the bottom line is that homeownership is still part of the American dream. Many of us are down right now due to the depressed economy, and making big purchasing decisions may not sound like a good idea. It is important to discuss this with your accountant or financial planner and your Realtor first. But if it is a possibility it is a great time to be a homeowner.