Renting vs. Buying in 2022? Couple Of More Thing You Need To Know! |
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Facts
According to a June (2022) report from Harvard University’s Joint Center for Housing Studies, between 2001 and 2019, rents rose 16% while renter incomes rose only 5%, both figures adjusted for inflation. (Source: WSJ). Costar is projecting a 4.9% increase for 2023. If rents continue to rise at 4%, $2,500/month rent today could be $3,700/m a decade from now.
Miami had the biggest increase in average rent, rising 59%. Rents are up 31% in Tempe, Arizona, 21% in San Diego, and 30% in Austin. However, rents have also risen in areas that have always had high rents: New York, Boston, Los Angeles.
Why do rents rise?
1. An imbalance between supply and demand.
2. More people focused on renting rather than buying, mostly because of affordability and availability of for sale homes.
3. Rising operational and labor costs for landlords, including rising real estate taxes.
4. Because people are willing to pay the price.
5. Aging housing stock that requires massive renovation and upgrades.
6. Fear of buying/committing to a purchase.
PROS
There are plenty of pros to renting Santa Monica homes, which is probably why the majority (58%) of those who live in the area rent their homes rather than owning them. Here are some of the reasons why renting can be better than buying:
- It’s more flexible. When you rent a home, you can move out at the end of your lease without having to go through the hassle of selling. You also have options to get out of leases should your life change and you need to make an unexpected move.
- You know what you’ll pay. When renting Santa Monica homes, you know what you’ll be paying each month in rent. When you own a home, your mortgage may increase due to an increase in home value and taxes and you may have unforeseen expenses such as the water heater going out or the roof needing repairs. This makes it easier to budget and often adds up fewer expenditures each month.
- Less maintenance. In most situations, you won’t be responsible for the upkeep of Santa Monica homes when you rent—especially if you rent a condo. Your landlord will take care of lawn care and exterior maintenance as well as doing any repairs that are needed inside your home. This frees you up to do what you please on evenings and weekends instead of spending them mowing the yard or painting.
Cons of Renting
Just as there are plenty of reasons why renting can be a good option, there are just as many reasons why it might not be the right fit for you. Here are some of the cons of renting:
- You will not get the tax benefit. Those who own Santa Monica homes get to write off the mortgage interest they pay each year. Renters get no such tax benefits.
- You won’t build equity. When you own a home, a portion of your monthly mortgage payment will go toward the cost of the home and the longer you own it, the more money you’ll have in equity. You get this money back when you sell and this amount grows as your home appreciates in value. When you rent, you will not build equity and will simply be paying for the privilege of living in the space.
- You (usually) can’t renovate. When you own a home, you can customize it how you please with home remodeling projects and updates. Most landlords will not allow you to renovate your rental (and you likely wouldn’t want to anyway as you would be putting money into something you don’t own.)
- You can be evicted. When you rent Santa Monica homes, you are at the mercy of your landlord. He or she can evict you if the home sells or for any other reason. This level of uncertainty is stressful for many people and they prefer to buy to have the security that comes along with owning.
Pros of Buying
Think you might be interested in working with a Santa Monica real estate agent to buy a house? Here are some of the reasons why it might be a good idea:
- You will have the stability that comes with owning. When you own a home, you experience settlement as well as the peace of mind that comes with knowing you cannot be evicted or told to move.
- You can redecorate or renovate as you please. Unless you live in an area with a restrictive homeowners association, you will be able to undertake any home renovation project you want to increase your home value and your enjoyment of your house.
- Tax benefits. When you own, you get to deduct the mortgage interest from your taxes each year.
- You will build equity. Owning a home is one way to build wealth. In fact, a home is usually a person’s largest investment in his or her lifetime.
Cons of Buying
Buying is not right for everyone. Here are some of the disadvantages of buying Santa Monica homes:
- You have unpredictable costs. You will be responsible for anything that goes wrong with the home and unexpected repair fees could be daunting if you don’t have an emergency savings fund.
- You have more responsibility. Lawn and exterior maintenance are on your plate when you own. If you don’t like spending time on these projects, you may want to choose to rent instead.
- You have less flexibility. If you decide you want to move to a new location, you will need to go through the process of working with a Santa Monica real estate agent to prep and list your home for sale. If your home doesn’t sell by the time you need to move, you could be facing two monthly payments for housing—one of your current mortgage and one of the rent or mortgage on your new home.
- You have an upfront cost. Though renting Santa Monica homes usually involves a down payment of one or two months’ rent (you can be asked to pay 3 months rent if a home is furnished), this is usually much less than what you’ll have to spend on a down payment and closing costs when you buy.
When you take all the pros and cons of renting vs. buying Santa Monica homes into consideration, you can usually decide which is the right choice for your unique situation. If you’re interested in buying Santa Monica real estate, reach out to a trusted local agent like Alena Lehrer who can guide you through the entire process.
