The Cost of Renting vs Buying

I’m going to wait to buy”; “Buying a home right now is just too expensive”; “I don’t want to be tied down to a mortgage”…

I hear these types of responses all of the time. It is disappointing when I know they could qualify to buy a home because, I know prices and interest rates will only go up over time. I also know that renting costs more than buying when you consider all of the related elements of dwelling costs.

My grandfather was born in and lived his entire life in San Francisco, CA.  When he was in his 20s he could have bought a house in San Francisco for $7,500. Today, homes in S.F. range in the millions of dollars. Unfortunately, he never did buy but rented. Had he purchased a home our family would be enjoying the beaches in Cancun.

Here is an article from “Market Watch” which addresses the question we all grapple with at some point in time. He also points out that we don’t need to buy a dream home to get started. Buy what you can afford now and move up has time and circumstances change.

In some cases there are legitimate reasons why someone can’t buy a home now: poor credit, saving money for closing costs and down payment, pending job relocation.  However, when you look at the reasons they are most often temporary and can be remedied.

Our daughter is currently renting. She and her husband just got full time jobs and have little savings. In the beginning, their landlord was pleasant and promised to take care of her place. However, things quickly changed. To make matters worse, he just raised the rent 28%! I’ll give you one guess what goal has moved to the top of their list.

If you are pondering the “rent vs. buy” question, I strongly recommend that you start the buying process as soon as you able.

7 Good Ideas for Remodeling

Thinking of doing some ‘freshening’ up in your home this year? Here are 7 good ideas you can do for little money.

Likewise, there are some things which were popular years ago but now are passe.  This article lists 2 of those things you want change.

The standards for most return value on improvement dollars spent, in this order are: mailbox, garage door, front door, kitchen and bathrooms. We find that money invested in these areas at least helps the home sell quicker and, often for more than you spent to spruce up the house.

Likewise, it remains, funds devoted to pools, bedrooms, and even living rooms, in that order, will yield the least profitable returns.

Kitchen Trends Add Value

The best return on your home improvement dollars is in the kitchen.  This article offers 10 suggestions for kitchen updates in 2017.

While the mailbox, garage and front door have the highest return for their costs, the kitchen is the #1 investment room inside the house. While you may not get 1:1 return you will get more of your money back in the form of a higher sales price than a home with a dated kitchen – you will get more bang for your buck than say, money spent on a bedroom.

Besides, don’t we spend a great deal of time in the kitchen? Especially when family and friends are over. Holidays, special events etc., often evolve around the kitchen.

Today’s Price vs. Bubble-Peak Price

In CA the average home ownership has been between 7 to 10 years.  So, now many home owners who, want to sell their homes, are having unnecessary hesitations. Their comments go something like this: “THAT’s all we can get for our house?! But we paid $X for it 10 years ago.  We’ll lose money if we sell at today’s price“.  So I ask: “Did you pay cash for your home?” When the home owners say: “no, we financed it” we have the following conversation.

Since you did not pay cash for your home, what you DID pay was principle, interest, taxes and insurance.  THAT’s what you have paid for your home, not the ‘Sales Price’ back then“.

Here is an example:  If they agreed to a sales price of $700,000 in 2006 and got a 90% home loan at 4.0% then what they have actually paid for their home looks like this: $198,293 principle (including the down payment) + $199,650* interest + $87,528* property taxes +$9,600 for insurance.  What they really paid was the total of $420,405 (*after income tax advantages).

So, if today’s market value is, say, $600,000 they didn’t really lose $100,000, they will actually get all of what they DID pay and another $179,595 ($600,000 – $420,405). That $179,595 is a 42.7% return on their investment!  Wow! What a different way to look at it.

Of course there were other expenses such as private mortgage insurance for a couple of  years, repairs and upgrades.  Still what they have actually paid for the home is considerably less than their original Sales Price.

Make sense?  If not, text, email or call me.  I’ll be happy to demonstrate your actual gain.

 

 

Do We Have Enough Homes?

On a national scale the enclosed article in Yahoo Finance points to the 6 reasons why there are NOT enough homes for prospective buyers.

Of course housing markets are typically influenced first by the neighborhood, then community, and finally by their region.  In ‘South County’ (Morgan Hill, Gilroy, Hollister, San Juan Bautista, CA) for example, there is a shortage of homes to choose from and, therefore, home values seem to be forever increasing.  12-16% annual appreciation is pretty typical.

In Hollister we are seeing a slight slow down in the appreciation pace for resale homes this year due to the significant number of new homes being built.  In 2015 the average single family residence value increased 12.6%.  Morgan Hill and Gilroy’s appreciation for the same period were: 15.5 and 16.9% respectfully. Hollister’s new home construction in 2015 affected its appreciation which, normally is on par or, even higher, than both Morgan Hill and Gilroy, CA.

So the proverbial question: “Is your glass half full, or, half empty?”

Morgan Hill, CA Home Values

Morgan Hill Ave. SPAs you can see here, the average sales price of single family residences in Morgan Hill CA continued to rise over the last 12 months.

This month’s average sales price (approximately $960,000) is roughly 26% higher than 11/14’s average price of $760,000.

You will also notice that the average price spiked in 9/15 at roughly $1,010,000.

Now is a great time to buy a home in Morgan Hill: the ratio of prospective buyers-to-available homes is a little more balanced; the interest rates are still South of 4.0%; and, the short commute into San Jose is very manageable.

It is also a great time to sell your home: it worth more now than in the last 10 years.

For both prospective buyers and hopeful sellers, a sale NOW will get you settled in before Christmas and for the start of the mid school year.

 

Simple Curb Appeal Improvements

Often I will have 4-6 homes to show buyers.  Each time we arrive in front of a prospective home the buyers nearly always comment on what they think the home will be like – based on what they first see from the curb.  And, typically an impressive front of the home opens to a similarly maintained home on the inside.   The opposite is also true.  There have been times when the buyer doesn’t even want to get out of the car, because the front of the house is shabby, overgrown, or in need of paint.

There are several simple and inexpensive things you can do this Spring to make your home very appealing.  Click here for 13 suggestions.  Each of these easy to do tasks also provide the most added value – to – investments you can do to the outside of your home.

Lastly, your neighbors may be a willing source of help if you announce your ‘sprucing up’ plans for the ‘tired’ front appearance of your home.

Home Prices in Our Bay Areas

Here is a quick glance, one page summary of year-over-year values for of our Bay Areas.

The median prices increased slightly in Santa Clara County (up 9%) and Monterey County (up 6%) but dropped 1% in San Benito County.

At the bottom of the summary page we see some indicators which suggest San Benito County values may rise in 2015: Inventory of homes for sale increased 14% 9/13 to 9/14 which is one of the causes of the median price to drop. However, the Days on Market (DOM) dropped a whopping 46%!  Since homes sold significantly faster year-over-year we may see San Benito County single family prices rise next year.

With one eye on these opaque indicators and one on “the holidays” disengagement many get caught up in – a shrewd buyer should buy a home before the year is out. And, with interest rates around 4% for a home loan, you could be one of the few others admire in the future: “You bought at the end 2014?  You really ‘lucked’ out”.

Why not text, email or call me?  With your answers to 4 simple questions I will be able to compute for you how much of a home you can qualify for and provide you with a list of those homes in your price range.

“Happy (Holiday) shopping”.

 

 

Love Your Tat? Want to Remove It?

Occasionally, I help out at our high school and I am often asked, “Hey Mr. Walters, have any tats?”  When I say “no” they almost always ask “why not?”.  (My answers are for another post).  It is becoming more common for young people to get tattoos.

Ask people your close enough to if they wish they had not gotten their tat and some will admit they do.  Nationally, 23% of adults have at least one tat and 2 out of 10 wish they could get rid of them.  Angeolina Jolie may be one. See hers?

Well, tell those who wish to remove their “mistakes” that there is a way.  This article covers virtually all of the questions you can imagine: the process, the cost, the affects, etc.  It is really amazing.

Do you have one?  Like it?  No?  Well, here you go.

Hollister Homes Highest Value Gain

Hollister, CA

Of the 3 cities which make up ‘ South County‘, the City of Hollister, CA single family residences saw the highest appreciation from 1st quarter 2013 to 1st quarter 2014.

The average Hollister single family residence (SFR) value rose 23.1% whereas Morgan Hill, CA experienced 21.9% and the City of Gilroy, CA saw their SFR rise by 11.2% from 1Q13 to 1Q14.

However, Hollister’s typical SFR value dropped 43% from 1Q07 (when many say the bubble burst) to 1Q13. Morgan Hill dropped 32.5% and Gilroy 30.6% during this same period.  Hollister’s ave.  SFR value in 1Q07  was $302,383, down to $240,798 in 2013 and up to $274,309 1Q14.

Another indicator of Hollister’s recovery is the time it takes homes to sell.  The average days on the market in 2007’s 1st quarter was a whopping 148 days.  In 1Q13 the time dropped to 124 days on the market.  That is a 69% improvement!  Then, this year we watched the average days on the market drop even further to 24.

Finally, the average Sales to List price ratio was 99.5% in the 1st 3 months this year compared to slightly over 96% in both ‘o7 and ’13 first quarter.  They are selling faster and virtually at their asking price.

What do you think this trend will do?

(data source: MLSListings)