By Jennifer Riner, Trulia
The question of whether to buy or rent your next home is a convoluted one. Clearly there are hurdles to homeownership, notably saving up for a down payment and getting your credit in order. However, the benefits are usually well worth the time and effort. Aside from building equity, the average homeowner in the U.S. spends less per month compared to renters in the same area. Part of the financial advantage of homeownership comes from low interest rates, but also stems from high rent prices. Even in popular markets like Coronado and greater San Diego, homeowners realize considerable monthly savings.
Although home values and interest rates are steadily rising, Trulia’s recent rent vs. buy report revealed that buying still beats renting in most U.S. metros areas. This past spring, the median rent price in San Diego was $2,500 per month while the median home value was $528,318, allowing buyers to save 25.8 percent over renters.
To get a better idea of how much you could potentially save by buying, see how the rent vs. buy calculations play out in various part of the San Diego metropolitan market, including Point Loma, Coronado and Imperial Beach. All percentages are calculated using recent home prices, rent rates and a 30-year fixed mortgage interest rate of 4.35 percent.
With a median rent price of $5,125 per month, renting in Point Loma is costly. However, if you were to purchase a median-priced home for sale in Point Loma for $1 million, you could theoretically save 31 percent in total monthly housing costs. When averaged out over time, the costs of renting in Point Loma are less than $5,000 per month, which includes fees such as the rent, insurance and refundable security deposit. Meanwhile, the total costs of owning a home in Point Loma come to $3,422 per month when the purchase price, closing costs, taxes and deductions average out over time.
Coronado homebuyers save around eight percent compared to renters. The current median monthly rent is $5,500 per month, which averages out to $5,295 per month – all costs above considered. Meanwhile, the median home price is $1,430,000, which costs $4,854 each month when averaged out over time. Keep in mind, this assumes you live in the home for at least seven years and have an income tax rate of 25 percent. It is even cheaper to buy than rent for individuals in a higher tax bracket. Homebuyers with a 35 percent tax rate experience a 16 percent savings.
Even homes in Imperial Beach at a median list price of $555,000 save buyers substantially. With that price point in mind, buying in Imperial Beach is 20 percent less expensive compared to renting a mid-range apartment at a rate of $2,500 per month. When totaled and averaged, the long-term costs of renting an apartment in Imperial Beach equal $2,118 each month while the costs of homeownership are an affordable $1,524 per month.
Owning versus renting is the best choice even in some of San Diego’s most luxurious areas. If you are in the process of buying a home stay abreast of interest rates and how they affect your
budget with a mortgage rate calculator. If you are thinking about selling, see how much your home could fetch under current market conditions with our free San Diego property value report.