If you’ve just arrived in San Diego County and are looking for a place to rent or buy, chances are that you’re in sticker shock and wondering how we all manage to live here. Plain and simple, housing takes a massive bite out of your San Diego income. According to an April 3rd article in the San Diego Union Tribune, low income families spend as much as 69% of their income on housing and many others spend more than 40%, well above the 30% government recommended percentage.
Let’s start with rentals. If you own your home and haven’t looked at rentals recently, you’ll be stunned at today’s prices. In March, the average monthly rent for apartments county-wide was $1887, according to MarketPointe Realty Advisors. That is an 8% increase over this time last year. Here’s the monthly average rent in various areas of the county:
I15 corridor - $1999
North coastal - $2261
Central San Diego - $2072
South County - $1651
East County - $1561
If you need something with more space than an apartment, houses to rent are in high demand. The current median rental price across the county for a 3 bedroom, 2 bath home listed on the MLS is $3600. Prices range from $2400 on up to $8000 depending on location and amenities. $3600 a month for rent!!
Prices of homes for sale have also continued to rise dramatically. According to the S&P CoreLogic Case-Shiller Index, home prices in San Diego during March were 7% higher than a year ago. The truth is that it is difficult to find a detached home for sale under $500,000, and especially difficult to buy without a large down payment. Let’s say you find a home for $500,000 and put down $25,000 (5%). Your monthly payment at 5% interest, with PMI, taxes and insurance will be roughly $3352, which is still better than paying $3600 in rent. You have the property tax and mortgage interest write-off, and you are building equity, but at that price point it is likely the home needs some work or is in a less desirable neighborhood. With fewer people able to purchase because of high down payment requirements, more people are pushed into the rental market which further increases demand and pushes prices upwards.
If you’re a comfortable homeowner with no intention of moving, this might not seem important, but housing prices have a big impact on our local economy. As more money is spent on housing, less is spent on goods and services and for some low income renters, an increase of even $100 a month could mean the difference between being homeless, or not. Additionally, our high housing costs can be a real deterrent to companies employing middle income personnel looking to locate here.
So, what will it take to curb rising prices? According to Lawrence Yun, chief economist at the National Association of Realtors, “more supply is needed to level out home prices. Homebuilding will be the key as to how the housing market performs in the upcoming years.”
Ready to brave the San Diego housing market? Please give me a call for a no-obligation consultation.