The Buyer's Guide: Affording a Home in San Diego
/Prior to life in real estate, I can hear my past self stating, "I make a good living, and will likely never own a home in California." This is something I hear often from people my age, therefore, I wanted to share with you some information, and tips to simply negate this thought. It's time to think different, and know that home ownership can and will be in your future.
1. Review the numbers
Are you currently renting? How much are you paying each month for this rent payment? If you're living in the city of San Diego, I can bet you're paying $1,500+ towards something that will never pay you back in return. Not only are your payments uncertain overtime (rent increases are happening more and more), but you're essentially throwing this money away. See below the proof in a detailed analysis created by Greg Parker of HomeServices Lending, that showcases the tax breaks and equity built over time when you own vs. rent. As this is a general analysis, I do recommend meeting with a professional to see the benefits you would specifically receive.
Photo by Sasha&Dasha Bakani on Unsplash
2. Start small and work your way up
The average detached home price in San Diego County is currently $713K (as of July 2018), which is beyond what most people can afford. Buying here is expensive, likely due to the fact that over 1 in 8 people in the U.S. live in California, making it one of the most expensive states to own homes in. However, we do benefit from this high demand as the appreciation for homes here is significantly higher year over year than versus say the Midwest. For example, the appreciation on a detached home in the La Jolla area, based on price per square foot, has gone up from $748 in Jan 2015 to $1054 as of July 2018, that's +40.9% in just three years! Knowing this, considering purchasing your starter home or apartment to build equity, then based on the strength of the market, considering selling to upgrade down the road. The commitment up front will be worth it in the end.
3. Consider all your options
Are you putting money away in savings, 401K, rainy day funds? Is that the best utilization of your dollars over time? I would not just assume so. This would be a question for your financial planner, but a great start is to meet with a lender to understand the full scope of what the cost of home would look like. They can give you a personalized consultation which will show you your monthly payments as well as the total costs to purchase. Then meet with your financial planner to see where you should allocate your funds, based on your personal goals. As with all financial investments, owning a home can have risks, but sometimes taking a risk can equal long term rewards.
