Statistics say it is Cheaper to Rent than to Own. What do you think?
Recent reports state that the average rent on a Class A apartment in San Diego has surpassed the average monthly mortgage payment in a single family home in San Diego County. While two years ago the average mortgage payment on a single family home was about $2,000 more than the average Class A Apartment asking rent. Today the Class A Apartment rent is $1,640 which is just a $100 more than the median single family home mortgage payment.
This has clearly been caused by the median single family home prices falling by about 55% in the past two years, or about 25% in the past year. To reach $275,500 for Quarter 3 of 2009. However, even with such a drastic fall in single family home prices there still remain a gap in the affordability of people to buy these homes. The metro’s median houseful income has fallen nearly 5% to $58,200 per year which is nearly $5,000 less than the income required to qualify for a median priced home.
While on the other hand though rents have declined, they have not declined as dramatically. In fact, 2009 will be the first year in more than a decade where rents have fallen in the city. Asking rents are forecasted to fall by 2.5% to $1,310 per month by end of 2009 while effective rents are projected to decrease by 4.3% to $1,246 per month.
With such a lackluster market it is not a surprise if household growth in San Diego is expected to be just 0.3% with an addition of only 2,800 households this year.
So is it actually cheaper to rent than own, or own than rent? We are interested in your views while we come up with an article on that soon.
June 27, 2011 - 3:50 PM
Living in a Class-A building in downtown San Diego and having gone over the numbers with a financial adviser, it would require me to take out an extra $180,000 on a mortgage just to cover the HOA over a 20 to 30 year loan depending upon how much I put down. Ridiculous. Many people do not take into account the exorbitant amount of HOA fees living in these buildings as a buyer. I own a condo in Florida with a somewhat reasonable HOA fee (compared to San Diego), but even that rate rises year after year. Makes much more sense to rent. No way I’d buy unless it was an absolutely awesome foreclosure or short sale, and I am frankly not patient enough to wait around for that kind of thing to open up.
July 9, 2011 - 6:21 PM
I don’t think it makes sense for a lot of people to buy vs. rent. There’s a lot of variable like the ones you pointed out which weigh into the decision.
A lot has to do with the price point, how long someone plans on living somewhere, how secure they feel in their job etc.
I am obviously biased since I like real estate and that is what I am comfortable investing in, others like stocks, bonds etc.
Some of the entry level houses we have been selling have had buyers who get VA or FHA financing and their mortgage payments are sometimes 30% less than rent. In the upper end areas it’s the opposite many times and probably wouldn’t make sense unless you are in it for the long term.
I am still bullish on San Diego long term, it’s very hard to build here and at some point the lack of building + the increase in population are bound to create an imbalance. Just don’t bet the farm on it happening right away.
Thanks for the feedback and comments.
Curtis