The previous article focused on how buying a home can still save you money by lowering your taxes. This article is all about the financial benefits of owning vs renting a home.
Owning vs Renting A Home
Among the positives of owning vs renting a home ia the fact you can customize it any way you wish. Painting rooms or the exterior is your choice, as are flooring, light fixtures, decks/patios, landscaping and some of the larger projects like remodeling a kitchen or bathroom(s). As a renter, you are unlikely to have these freedoms. Even if your landlord/lady goes along with such suggestions and allows you to make them at your expense, when you move they get to keep the improvements you made and are not likely to reimburse you for them.
Conversely, when the toilet backs up or the roof leaks or the oven stops working, you do not have the option of calling a landlord to take care of these setbacks when you own your own home. Unless you hire a gardener, you can also look forward to mowing your lawn and weeding and tending to your garden. Can we quantify or otherwise justify ownership when these hassles come with it?
If you are fortunate enough to live in San Diego County, the answer is clearly, YES!
For the past seven calendar years, homes across the county have appreciated faster than inflation. Three of these calendar years have seen double digit appreciation year-over-year. 2017 alone saw the price of a home in San Diego County appreciate by an average of 10.1% (source: San Diego Association of Realtors).
With rents increasing an average 8% last year and expected to increase even more this year, having a fixed rate mortgage means much greater stability in your life. With salaries expected to rise an average of 3% this year (up from 2.6% last year and 2.4% the year before), it should not take very long to understand why someone renting feels like their money is vanishing into thin air when their rent is increasing at almost four times the rate their pay is increasing.
If this isn’t enough, consider that had you owned a condo bought for $400,000 (average price for California last year), today it would be worth about $440,000. This $40,000 is likely more than the raise you received at work. Just as importantly, your monthly housing expense has not risen 8%, or $180 from last year, it has likely risen more than that!
To summarize, as an owner you have $0 increase in your monthly housing payment each and every year. You get to enjoy your home all the while seeing it rise in value. If you are worried about another downturn in the housing market, consider that there are many more regulations in place today to avoid making loans without qualifying the borrower and the property. Additionally, San Diego County is several years behind in new housing starts, which means too few homes for our growing population. Last but not least, the Navy intends to expand their presence by some 15,000 only adding to the current demand for housing.
Next time, we will discuss how you can act now and buy a home without having to wait to save the 20% down payment.