This article is the latest in a series that speculates on future housing market conditions…
Should I rent or buy a house in San Diego in 2017? What’s better in terms of monthly costs?
These are common questions among renters and people relocating into the area, who are pondering the idea of homeownership. And many people are surprised to learn that they could buy a house in San Diego with only a slight increase in their monthly housing costs, when compared to renting.
Additionally, those choose buying over renting have the option to use a fixed-rate mortgage loan, which essentially allows you to “lock” your monthly payments so they stay roughly the same over the long term.
Here’s some more information to help you decide if you should buy or rent a home in San Diego in 2017.
Cost Analysis: Buying vs. Renting in San Diego
Monthly housing costs are one of the primary considerations when choosing between buying or renting. So let’s look at the numbers.
- As of June 2017, when this article was published, the median home price in San Diego was around $564,000. That’s within the city itself — it’s a bit lower when you look at the whole county.
- The average interest rate for a 30-year mortgage loan during the first week of June was 3.94%, according to Freddie Mac.
- The average down payment for home buyers in San Diego is around 10% of the purchase price (though many borrowers choose to put down less than that).
- This leaves us with a loan amount of $507,600. When financed over 30 years at current mortgage rates, that would yield a monthly payment of around $2,400.
- According to the rental housing search engine Rent Jungle, the average rent for a two-bedroom apartment in San Diego was $2,187, as of June 2017.
- So in this real-world scenario, the monthly costs after buying a median-priced home in San Diego would only be slightly higher than renting an apartment.
And there’s another important consideration here. Home buyers who use a fixed-rate mortgage loan to buy a house can enjoy a monthly housing payment that basically stays the same over time. The same cannot be said for renting.
“Locking” Your Monthly Payments With a Fixed-Rate Mortgage
There are many different kinds of home loans. Some of them have adjustable or variable interest rates that can change over time. Others have a fixed rate that stays the same for as long as the borrower keeps the loan. This latter version is referred to as a fixed-rate mortgage loan, and they’re available with different lengths or “terms.”
The 30-year fixed-rate loan is by far the most popular financing option among San Diego home buyers in 2017. With this product, you get to keep the same interest rate for the full 30-year repayment term (or until you either sell or refinance the home).
This is an important consideration for those wondering if they should buy a house in San Diego. This financing method essentially allows you to “lock” your monthly payment so that they stay roughly the same over the long term.
Consider the difference:
- San Diego rents have risen steadily over the last few years, and they could very well continue along this path. We just don’t know, and therein lies the uncertainty of rental costs.
- In contrast, a person who buys a home in San Diego with a fixed-rate mortgage loan could have the same monthly payments over the long term. In other words, there aren’t any surprises down the road. It’s a much more predictable and stable housing situation, in terms of monthly costs.
A distinction: As noted earlier, some home loans carry an interest rate that adjusts or changes over time. These are aptly referred to as adjustable-rate mortgages, or ARMs. But in this article, we are talking about using the more popular fixed-rate home loan.
So, should you rent or buy a house in San Diego in 2017?
This is a big question that requires careful research, beyond just the monthly costs. But if you’d like to enjoy the many benefits of homeownership, along with a monthly payment that stays the same, consider buying a home with a fixed-rate mortgage. It gives you more control over your monthly costs, when compared to renting.