Should you buy a home or rent one, in San Diego?
As always, that depends. If you're looking for a home in La Jolla, you may never find a one which is less expensive to own than rent, in today's dollars. The physical beauty of the seaside burg is stunning and La Jolla has traditionally traded at a steep premium to rent v. own parity.
Nick Timiraos suggested that buying conditions are getting better for San Diego, in the Wall Street Journal:
Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised "to pick up even more momentum across the country next year."
Rising rents are one reason a would-be home buyer should consider purchasing a La Jolla home rather than waiting for prices to reach parity there. If inflation kicks in, and onc day it will, rents could increase a level far above what the mortgage payment, for a La Jolla home, would be today.
Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting
Take note of this figure. In many San Diego sub-markets, (mostly the beach cities), housing prices will never reach parity with today's rents. Like the La Jolla example, inlaftion may cure that in 2-3 years. Still, some San Diego County markets have already reached parity meaning, it's cheaper to own rather than rent. Even in some beach cities, like Oceanside or Imperial Beach.
I searched active Oceanside homes for sale and found one which is listed for $189,000. With about $7,000 down payment, and an FHA loan with a 4.88% APR, the monthly mortgage payment would be $1250, some $50-$100 below what it might fetch in rent. That's one of many Oceanside properties which are at or below parity for the rent V own model.
I also found plenty of similar opportunities while searching for homes for sale in Chula Vista. There were many more recently built homes, which command premium rents, listed under $250,000.
San Diego entrepreneur Bill Lyons intends to make these home searches easier when he releases his new website, Revestor.com. Revestor organizes current listings, by capitalization rate or cash flow, to offer homeowners a chance to "rate" properties, by comparing the listed price to current rental data.
San Diego is still selling at a slight premium but this may be as good as it gets. If mortgage rates continue to stay low, because of the Fed's printing press and quantitative easing, the bubble for low rates will soon pop, and inflation will kick in. Locking in a price, and a low mortgage rate, might be the best way to insure you won a piece of our sunshiney paradise.
