The high cost of homes in parts of California has many consumers asking if now is a better time to buy or rent.
The short answer is, “It depends.”
One thing it depends on is your reasons for wanting to buy a home. Home ownership, besides being a financial investment, gives you a place where you can put down roots, raise a family, own pets, plant a garden, hang wallpaper or remodel. So, when considering whether to buy or rent, there’s more to think about than just finances.
Owning a home also provides an owner with tax write-offs in connection with mortgage interest payments, as well as the chance for appreciation in the value of the home.
Your choice will also depend on where in California you are house-hunting. In some areas of the state, there is a shortage of housing for sale and purchase at an affordable price, and the demand in those areas is greater than the supply so home prices have increased dramatically. In other parts of the state, homes may be more affordable.
The answer also depends on whether you are buying your first home or selling your existing home. Those selling a home can roll the equity they’ve earned into another home which might lower the mortgage amount and monthly payments. But don’t forget that your property taxes are based on the purchase price, not the amount of your mortgage.
First-time home buyers have more to think about. Besides the price of a home, they need to consider coming up with the down payment and fees incurred during an escrow such as home inspection costs, title insurance and loan fees. When determining your monthly payments, remember to factor in property taxes, home insurance, utilities, maintenance expenses and the possibility that you will need to buy new appliances.
When you take all of these factors into consideration, renting might make more sense. Renting allows you to be flexible and doesn’t tie you down to a specific geographic location. It allows you the freedom to more easily relocate, which is important if you think you might want to change jobs or move to a different city. Renters typically don’t have to worry about home repair and remodel costs and typically don’t have to pay property taxes.
One thing to keep in mind – whether you are renting a home through a property management company or buying a home with the help of a real estate salesperson – is that you should always work with licensed individuals and check their licenses to ensure the licenses are in good standing.
Real estate sales agents must be licensed in California and must work under a California-licensed broker. Property management companies representing property owners must be operated by a licensed real estate broker. You can check a license HERE at the California Bureau of Real Estate’s website.
Deciding whether to buy or rent is a big decision that all depends on you.
