To rent or to buy? That is the ongoing question for those looking to find a place in San Diego and Coronado.
While each choice may be geared towards different stages of life, it is essential to consider the pros and cons of each for the future.
There are now fewer first-time buyers who can afford to buy real estate because they are entering a tough market with higher home prices and a rise in mortgage interest rates.
Fewer mortgages for first-time buyers
According to Realtor.com, the number of first-time buyers who took out mortgages last year dropped by 22%. In just the last quarter of 2022, first-time buyers took out 40% fewer mortgages than they did a year prior.
These numbers speak for themselves—the path to homeownership is not an easy one and many are opting out of the process. Yet, it is not impossible, and often recommended when considering the significant chunk of income that renters dish out every month.
According to information from the 2021 U.S. Census Bureau’s American Community Survey 5-year estimates as stated by NBC 7 San Diego, more than half of all renters in San Diego County spent ⅓ of their salaries on rent alone.
It has commonly been advised by financial experts that Americans don’t spend more than 30% of their gross income on housing. The same study noted that one in three renters spend more than half of their salaries on rent.
Renting vs. buying
With significant roadblocks found in both purchasing a home and renting a property, it is important to consider the advantages that buying may have for your future financial well-being in comparison to renting.
Most renters have the income to buy a home, they just don’t know it. Let’s break down what happens with your money with long-term rentals.
According to Zillow, the median rent in San Diego for a one bedroom property is $2,544.
Putting that into perspective, if you spend an average of $2,500 a month on rent for five years, you will end up spending $150,000. After 10 years, you would end up paying $300,000. After 15 years, $450,000.
For larger families who rent a three bedroom home, Zillow says the average rent in San Diego is $4,450. Rounded to $4,500, that would be $270,000 after five years, $540,000 after 10 years, and $810,000 after 15.
Rent is not cheap
You get the picture. Rent is not cheap.
Although it is definitely cheaper for the immediate present and understandably all that many people can swing, there are a few huge downsides to renting in comparison to buying.
First and most importantly, all of that money you spend on rent will disappear forever; there is no capitalization like there is with buying a property that will slowly increase in value over time.
Homeowners will receive deductions on mortgage interest paid, while renters receive no interest payment deductions and are subject to the rent amount increasing at any time as determined by the landlord.
Running all renovation and update approvals through a landlord is also another downside to renting. Especially if you are planning to stay with a property for an extended period of time, owning a home will give you the freedom to really make it a home, molded to all of your preferences.
Reach out to Corey
For more information about the pros and cons of renting versus buying, don’t hesitate to reach out at 619-568-0568 or info@simonerealestategroup.com. Also, be sure to contact me if you have any topics you would like me to discuss in the future.
As your trusted real estate agent, I am always here to help answer any questions you may have regarding the world of real estate.
-Corey
