The Cost of Renting vs. Buying

Highlights:

• Historically the Percentage of your income needed to afford a home vs. renting was a much closer margin. Making renting make sense.
• Now... Renting will cost you 30.1% of your income compared to buying a median home at 15.3% of your income.
• Either way you're paying a mortgage... why not have it be yours?

Looking to Buy, Sell, or Invest in San Diego, CA? Contact:

David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist

David@AwesomeSanDiegoRealEstate.com
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

Guess Where Residential Rents are Heading?

Each month, many people are faced with the decision of renewing their rental lease for another year or purchasing their first home. One of the questions that must be answered before they make a decision is – “Where are rents headed?” The Wall Street Journal recently wrote an article on this issue. Their conclusion: “Apartment rental increases slowed in the first quarter from a year earlier, but the move is more likely a temporary blip than the beginning of a long-term respite for renters.” The article goes on to quote Ryan Severino, a senior economist at Reis: “I wish I had a better story to tell renters these days, but I think they’re in for some rent increases for the foreseeable future.” Probably the most interesting part of the article came in the Comment Section where a proud landlord proclaimed: “As a landlord I can tell you I don't pay property tax. I don't pay for repairs. The tenant pays. I get my money off the top.” Here is a chart showing rent increases over the last 25+ years: Looking to Buy, Sell, or Invest? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

2 Out of 3 Renters Want to Own. What’s Stopping Them?

The Federal Reserve Bank of New York recently released the 2015 SCE Housing Survey. The survey revealed that most current renters would prefer owning and that 61.9% of them plan to buy a home within the next five years. 68.3% stated they would prefer owning (with 45.6% saying they ‘strongly’ prefer owning). When asked at what point in the future do they think they will own a primary residence:

8.2% said within a year
15.3% said in 1 to 2 years
38.4% said between 3 to 5 years

What’s Holding Them Back? Of the 68.3% who would prefer to own, 2 out of 3 cited difficulty in getting a mortgage for the reason they do not own. However, many believe that the reason so many think that it would be difficult to get a mortgage is not fully based on current market realities. For example, studies have shown that there is confusion over the amount of money needed for a down payment. Research has shown that 40 to 50% of Americans believe that between 15-20% is the minimum required for a down payment. In reality, there are many programs available at 5% and even 3%. 

There are even some programs that don’t require any down payment (ex. VA loans). Others fear they need a perfect credit score or believe that the overall mortgaging process has become almost impossible.Actually, the Mortgage CreditAvailability Index, a report from the Mortgage Bankers Association, has shown that, over the last seven months, access to mortgages has gotten much more available. And the NY Fed study suggests that some renters are waiting for interest mortgage rates to fall even further. 

Fifty percent of the renters surveyed believe mortgage interest rates will fall over the next year and almost 10% believe that they will fall by more than 1%. However, the reality of the situation is that Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors are all projecting that rates will be significantly higher at this time next year. They are all predicting mortgage rates will be almost 1% higher!

Bottom Line

Many renters want to own their own home. Some are not moving forward based on misunderstandings regarding the mortgage process. If you are currently a renter who desires the benefits of homeownership, sit down with a local real estate professional to determine what your options actually are.

Looking to Buy, Sell, or Invest in San Diego, CA? Contact:

David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist

David@AwesomeSanDiegoRealEstate.com
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

The Ultimate Open House Checklist

You know what they say about the master bedroom: “This is where the magic happens.” It’s certainly a top priority for buyers-after all, this is where they’d spend a solid eight hours of their day. So, for your open house, make sure your master bedroom is a peaceful place that makes buyers wish they could snuggle up and take a nap right away.checklist of everything you need to do to get your master bedroom open-house-ready.

Make the bed. You’d be surprised how many homeowners leave without making the bed. This is not your real estate agent’s job. (Unless you’re 13 years old and you hired your mom as your agent, but even then, come on!) Your bed should be made for every open house and every showing.

Make the bed beautiful. Now’s the time to match your sheets, pillows, blankets, and duvet. Think Pottery Barn or West Elm. And fluff those pillows!

Create a  seating vignette. If you have the space, try staging a plush chair with a small side table and reading lamp. It will allow buyers to picture themselves there, taking a much-needed timeout.

Paint a neutral color. Your real estate agent will always urge you to paint your whole house a neutral color—and this tip is more important in the master bedroom than anywhere else. Add pillows, throws, and rugs for pops of color.

Spin it to win it. A slowly rotating ceiling fan helps create a relaxing mood—but make sure to clean the blades first.

Breathe deeply. The only scent in the air should be that of a clean, fresh room. We’re not big on air fresheners, but a simple diffuser can add a subtle fragrance. A potted orchid can also add a sophisticated touch.

Light it up. Yes, you sleep in the dark, but don’t greet buyers with a dull, dim space. That single overhead light is not enough. Put a lamp in the corner and a couple next to the bed.

We said: Light it up! It’s great if you've got serious drapes, but please open the blackout shades before leaving the house. Buyers love natural light.

Stage the bedside tables. Ditch the unread US Weekly and tangled iPhone cables, and replace them with a simple clock, a decorative vase, and a book or two. Reading “ The Liar“? Set it next to the bed. It might be that one thing that helps you connect with your buyer.

Sweep/mop/vacuum/dust. Basically, clean the bedroom from top to bottom.

Attaining the American Dream: The 5 Financial Reasons to Buy

It's been reported many times that the American Dream of homeownership is alive and well. The personal reasons to own differ for each buyer, with many basic similarities. Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership his paper - The Dream Lives On: the Future of Homeownership in America. Here are the five reasons, each followed by an excerpt from the study: 
 
1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.” 
 
2.) You're paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.” 
 
3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.” 

217,726 Reasons to Buy a Home Now!

The inaugural Opportunity Cost Report was released recently by realtor.com. The report explained that “with interest rates and home prices expected to climb in the next year, the financial penalties of delaying or forgoing a home purchase in today's market have become very steep”. The report estimates that, based on today's dollars, the average purchaser would accumulate $217,726 in increased wealth over a 30-year period. (You can get the projected wealth increase for almost 100 metros here.)

What could this mean to someone sitting on the fence waiting to buy?

Experts believe that both home prices and mortgage interest rates will increase over the next twelve months. Obviously, if this does happen, the monthly cost of a home a year from now will be dramatically higher than it is today. The Opportunity Cost Report breaks down exactly how much a purchaser could lose over increments of one year and three years. Here are the results based on an average purchaser in the U.S. delaying their purchase:

Bottom Line

If you are ready, willing and able to buy a home, waiting doesn't make sense. 

Looking to Buy, Sell, or Invest? Contact:

David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist

David@AwesomeSanDiegoRealEstate.com
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

The Truth About Rising Prices & Family Wealth

The National Association of Realtors (NAR) recently released a report revealing that the growing wealth gap in this country has been impacted by the recent increases in real estate values coupled with the drop in homeownership rates. The report discloses:

“Over 90 percent of metro areas have experienced declining homeownership rates at a time when home values have risen and incomes have remained flat.”

Increasing home values in many regions of the country have helped homeowners build housing wealth in recent years. However, the continued decline in homeownership means this increase in wealth is shared by fewer people and likely leading to worsening inequality in the U.S.

Here is a chart showing the aforementioned increasing gap between renters and homeowners in regard to family wealth:



Bottom Line

If the experts are correct, and a homeowner really will have an average of 40 times the wealth of a renter by the end of this year, doesn’t it make sense to evaluate if a purchase could be in your future? Meet with a real estate professional in your local market to find out how you can start building your family’s wealth.

Looking to Buy, Sell, or Invest in San Diego, CA? Contact:

David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist

David@AwesomeSanDiegoRealEstate.com
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

The #1 Reason to Buy Right Now – THE MONEY!

People often ask whether they should buy a home now or wait. Recently released data suggests that waiting may not make sense as prices seem to again be on the rise. Let’s take a look at some of the data and commentary on the subject: Ed Stansfield, chief property economist at Capital Economics: “The current tightness of supply conditions would normally be consistent with much faster price growth. The continued steady growth in home sales that we expect this year will only add to this upward pressure on prices.” Case Shiller Home Price Index “The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.1% annual gain in March 2015 … with a 0.8% increase for the month.” Anand Nallathambi, CEO of CoreLogic “All signs are pointing toward continued price appreciation throughout 2015… Tight inventories, job growth and the impact of demographics and household formation are pushing price levels in many states toward record levels.” Danielle Hale, Director of Housing Statistics at NAR “Even without further acceleration, the pace of price growth remains too high. Strong buyer demand and low inventories coupled with relatively low new construction are helping to push prices up, keeping the housing market tipped in favor of sellers.” FHFA Principal Economist Andrew Leventis "The first quarter saw strong and widespread home price growth throughout most of the country. Home prices are now, on average, roughly 20 percent above where they were three years ago. This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of overall inflation observed during that same time period." Bottom Line If you are planning on buying a home in the near future, waiting probably doesn’t make sense from a purely pricing standpoint. Looking to Buy, Sell, or Invest? Contact:

David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist

David@AwesomeSanDiegoRealEstate.com
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

Buying a Home is 35% Less Expensive than Renting!

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States. The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide! The other interesting findings in the report include: Interest rates have remained low and even though home prices have appreciated around the country (3.9%), they haven’t greatly outpaced rental appreciation (3.7%). “In the past year, these two trends have made homeownership even more affordable compared with renting.” § Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy. § Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.  Bottom Line Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, so lock in your housing cost with a mortgage payment now. Looking to Buy, Sell, or Invest in San Diego? Contact: David Demangos 858.232.8410 Locally Known, Globally Connected Luxury Home Marketing Specialist Global Property Specialist David@AwesomeSanDiegoRealEstate.com www.AwesomeSanDiegoRealEstate.com Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!