Best for millennials to buy or rent?
If
you’re a millennial crunching numbers on whether to buy or rent in San Diego, a
new study says it’s a tossup.Real
estate data provider Trulia found 10 major cities where very
San
Diego fell in the “tough call” category, just six places away from Honolulu and
San Jose, the only two cities in the country Trulia said it made more sense to
rent.
“It
is only 10 percent cheaper to buy a house than to rent a house in San Diego,”
said Trulia economist Ralph McLaughlin.
The
methodology factored in that millennials (ages 25 to 35 years old) will likely
not be able to put down the traditional 20 percent on a mortgage. It used the
San Diego average home rental of $2,325 and median home price of $488,959.
McLaughlin
said San Diego’s home prices have outpaced rent growth. Just three years ago,
it was 27 percent cheaper to buy than to rent for millennials, Trulia data
shows.
The
only other places that changed more were those hit hard by the Great Recession
that have only recently bounced back: Las Vegas, Phoenix, Riverside, Sacramento
and Bakersfield.
“That’s
actually a very big swing,” he said. “San Diego is somewhat of an outlier.”
The
president of the San Diego Association of Realtors, Chris Anderson, said that
she always recommends millennials buy a home rather than rent because of tax
write-offs and other factors.
“Even
if it is a little more than what they are paying in rent, they are owning the
home so they are starting their wealth building,” she said. “They have also
secured their cost of shelter. No one can raise the rent on them.”
The
Trulia study assumed a millennial will have 3.87 percent mortgage rate on a
30-year fixed-rate loan, itemized federal tax deductions, be in a 25 percent
tax bracket and be able to put 10 percent down.
Where
renting beats buying (and where it’s a tough call)
1. Honolulu, Hawaii (Median home: $612,642.
Median rent: $2,500)
2. San Jose (Median home: $907,806.
Median rent: $3,500)
3. Orange County (Median home: $639,129.
Median rent: $2,800)
4. San Francisco (Median home: $1,100,000.
Median rent: $4,400)
5. Oakland (Median home: $617,357.
Median rent: $2,800)
6. Sacramento (Median home: $326,910.
Median rent: $1,650)
7. Newark (Median home: $326,045.
Median rent: $2,200)
8. San Diego (Median home: $488,959.
Median rent: $2,325)
9. Ventura County (Median home: $514,053.
Median rent: $2,500)
10. New York (Median home: $437,834.
Median rent: $2,350)
Source: Trulia
“Ten
percent in expensive places like San Diego can still be quite a bit of money,”
McLaughlin said. “That’s something that first-time buying households need to
think about.”
The
study also included home costs outside of a mortgage — maintenance, property
taxes, upfront costs and insurance.
The
best places to buy instead of rent are Houston, Texas; Baton Rouge, La.;
Syracuse, N.Y.; and Fort Lauderdale, Fla., the study said.
If
the Federal Reserve raises interest rates it could become a better financial
move for millennials to rent in San Diego, McLaughlin said.
By Phillip Molnar | 5 a.m. Oct.
21, 2015 | Updated, 7:51
p.m. | Oct. 20, 2015
Real estate data
provider Trulia found 10 major cities where very high home prices make renting
more favorable — or it is at least a close call. San Diego is a toss up. — K.C. Alfred
No comments:
Post a Comment