Buying versus Renting


Everyday I wake up, turn on my computer and read all the real estate news.  But pretty soon I’m scratching my head, wondering whether or not anyone really has a clue about what’s going on.  One story says values have double-dipped at a new low, another says they’re on the rise.  Some “experts” insist that reducing unemployment will drive the real estate recovery, while others have the statistics to “prove” that a stronger real estate market will be what heals the national economy.  No wonder the real estate market is stagnant – everyone is paralyzed by uncertainty!

As noted previously, I have no crystal ball.  Nor do I have a doctorate in economics.  However, I do know one thing that will help heal both the real estate market and the overall economy:   Would-be buyers and defaulting owners – take action now!  

If you are thinking about buying a property, quit thinking and start doing!  This is a fabulous buyer’s market and both prices and interest rates are at incredible lows.  If you’re worried that you won’t get the absolute lowest price because values might continue to drop, you’re probably wrong.  Most experts believe that we’ll see some slight ups and downs in value over the next 2 years, but it will be more of a bumpy road versus a roller coaster dive.   If you wait another year to buy, you’ll lose 12 months of mortgage interest deduction, and the enjoyment of owning your own home or investment property.

On the other hand, if you’re unable to continue to make your mortgage payments it’s definitely time to take action.  You probably won’t win the lottery, so call your bank and try to get a loan modification.  If that doesn’t work, consider a short sale.  Avoiding a foreclosure through short sale is generally not only better for the seller, but it will help the real estate market and economy.  Banks are choking on foreclosure inventory, and as those homes are released into the sales system they are often neglected and tend to lower home values.  Reducing the number of new foreclosures is key to recovery for everyone.

So if you’re still unsure and have questions about buying or selling, just give me a call.  I’m ready when you are to help turn this market around!

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I’m almost feeling like we can breathe again.  We’re not out of the woods, but here in San Diego, we’re headed in the right direction.  And surprisingly, the next generation of home buyers is not running screaming into the night frightened by the plague of foreclosures, but rather embraces the idea of one day owning a home.  Check the numbers.  What do you think?

According to a January 2011 Harris poll conducted on behalf of Trulia, the American Dream of home ownership is alive and well.  70% of those surveyed say that home ownership is still part of their dream, and 78% of homeowners surveyed say that their home is the best investment they ever made.  Well, those are probably folks who didn’t buy in 2004-2006.  Buyers during those years are probably the 20% who feel trapped in an underwater equity home or the 14% who are considering just walking away.  Like I said, we’re not out of the woods.

But what I found very refreshing is that 88% of 18-34 year olds aspire to be homeowners, and overall  in the west 70% of renters plan to become homeowners.  In my estimation, this group will drive the long-term recovery, and drive the next real estate bump in value. Only 10% plan on buying in the next 24 months, but they will help prime the pump.  By 2015 we could be in the midst of the next upswing.

So when to buy?  Consult with your accountants and money managers, but my bet is now….just as we turn the corner and start to head up.

In a survey of the 50 largest U.S. cities, Trulia found that it is still more affordable to buy than rent, even in San Diego.  But does this survey tell the whole story?

According to the guidelines the company used, a price-to-rent ratio of 1-15 means that it is more affordable to buy than rent, a ratio of 16 – 20 indicates it is more expensive, but still might make financial sense, and a ratio of 21+ means that it is definitely much more expensive to buy than rent.  San Diego scored a 15, and only 4 cities were over 21, including San Francisco, Seattle, New York, and a surprise, Kansas City, MO.

That all sounds well and good, but it should be pointed out that the survey compared the cost of buying versus renting 2 bedroom apartments, condos and townhomes, not single family residences.  The company arrived at the numbers by comparing the median list price of homes offered on their website for 2 bedroom units to the median rent for a comparable home.  Also, I’m not sure that looking at list price is an accurate indicator as most homes do not sell at list price.

The other problem I have with the survey is that it doesn’t take into account the level of demand for apartments or townhomes versus single family homes.  In New York or San Francisco, there is a much higher demand for condo living than there is here in San Diego.  I believe a more accurate survey for our market would be the comparison of buying versus renting a 3 bedroom 2 bath single family home analyzing sales price and actual rent paid.

The survey results did however indicate an interesting shift in the demographics of who is buying and renting.  According to Tara-Nicholle Nelson, consumer educator for Trulia, “Lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of long-time homeowners are finding themselves tenants – some by choice and others by necessity.”

In the end, I don’t really believe that renting or buying a home is just about the numbers, and who is under the roof with you is much more important than the cost.