teWondering if you should rent or buy? Here are four reasons why renting in Santa Clarita could benefit you in the current market.
Should you rent or buy? It’s an age-old question without a simple answer.
Yet the current real estate market is making the choice a little easier for some.
The market has been in flux since the pandemic started, and despite rising interest rates, home prices aren’t coming down.
Add in the cost of taxes and insurance – and consider how highly competitive the market is – and you may prefer saving money, time and stress by renting.
But the right answer is different for everyone.
To help you find clarity in a dizzying housing market, here are four reasons you might benefit from renting a home in Southern California.
Why Renting In Santa Clarita Makes Sense Right Now
High Interest Rates & Home Prices
During the first year of the pandemic, mortgage rates hit record lows while home prices started to surge. By the end of 2020, homeowners were seeing rates as low as 2.86%, according to Freddie Mac, and the housing market was hotter than ever.
In January 2022, however, the Federal Reserve began raising rates on a nearly monthly basis, reaching as high as 5.612% for a 30-year fixed-rate mortgage in early July. Yet rising rates have done little to bring down home prices in a still-hot market that’s driven by Santa Clarita’s low inventory and high demand. In fact, current prices are about 30% more than they were in 2020.
When combined, high home prices and rising mortgage rates are killing affordability in the housing market. According to an example by CNBC’s real estate analysts, a $400,000 home with a 20% down payment would have seen a monthly mortgage payment of $1,399 in January. As of June 2022, that monthly payment is $1,976 – a $577 increase. Consider that the house is likely 20% more expensive than it was a year ago, and it doesn’t seem like a great time to take on a new mortgage.
Additional Costs Of Ownership
As the cost of owning a home rises, there’s additional costs and fees to consider. On top of the monthly mortgage payment, homeowners pay property taxes and insurance, as well as HOA fees or mello-roos for certain properties. All these elements impact the monthly payment.
For example, let’s consider the monthly payment on an $850,000 home, the median home price in Santa Clarita in May 2022. With a 20% down payment, the monthly mortgage payment would be $3,747. When you add property taxes and insurance, the monthly cost rises to $4,901, according to the Southland Regional Association of Realtors (SRAR). On top of that, you’re taking on the cost of upkeep and maintenance, from landscaping to home repairs.
The bottom line is: The costs of homeownership add up quickly these days.
Low Inventory, High Competition
In addition to the cost of buying a home, the process of a home purchase is not always an easy one in the current market. The market has been extremely competitive for a long time, and while we might see some easier negotiating positions in the future, it’s still a highly competitive market. Until we start to see more inventory in the Santa Clarita and Southern California markets, you can expect it to stay that way.
According to a Redfin analysis of the Santa Clarita market, many homes are still getting multiple offers, some with waived contingencies. The average home sells for about 4% above list price, while hot homes sell for 8% over list price – and only last about 6 days on the market. In fact, most homes sell after just 15 on the market, compared to 22 days last year.
Change On The Horizon
Once you’ve considered the cost and process of buying a home in the current market, most real estate and financial experts suggest considering your lifestyle. In fact, there’s one question that all potential homeowners should ask before buying a property: Do you see your life dramatically changing anytime soon?
If parts of your life are in flux, such as your career or plans for the future, then it might not be the best time to settle down with a 30-year loan and monthly mortgage payment. After two years of drastic change on almost every level, it’s likely that there’s still a level of instability or uncertainty ahead for most of us. Things will continue to change – from the housing market to the job market – as we continue to move forward. The important thing to understand is whether or not things will change for you.
As we anticipate more change and volatility in the markets, one of the biggest benefits of renting is the flexibility it allows tenants.
How We Can Help
We are committed to the success of our tenants and property owners. That’s why we offer a wide range of services and programs to provide the support you need.
Contact us today to learn how we can help.
About Southern California Real Estate Management Inc.
Southern California Real Estate Management Inc. was founded in 1987, and has grown to become the largest property management company of individually-owned single-family homes and condominiums in the Santa Clarita Valley. Our locally owned and operated company currently manages about 700+ homes in Southern California. Our Team specializes entirely in residential property management.