Photo: Sage Solar/Flickr
Hearing that the median home price in San Francisco is $1,000,000 may automatically drive some people to rent. Unless you are one of the lucky residents that live in a rent controlled unit for years, many of us have to consider buying or renting market-rate properties in SF or surrounding cities.
According to a recent Bloomberg article, rent doesn’t look like it is going down anytime soon. In fact, rental vacancies are hitting an all time low since 1985.
Image: US Census Bureau/Bloomberg
Mortgage payment and rental rates can potentially run about the same (depending on individual) in this market. In San Francisco, the latest average rent for a one-bedroom is $3,213. For two-bedrooms the average is estimated to be $4,385.
Based on this chart, a house at median price could potentially be $3,880 in the given scenario, lower than the average rent for two bedrooms in San Francisco. You can use mortgage apps and calculate your own figures. Wency Estrera, mortgage loan officer at Umpqua Bank shares that “interest rates are still at historic low, presenting an excellent opportunity for qualified buyers. The key is being pre-approved and knowing what your budget is.”
Renting versus owning isn’t apples to apples. If you are on the fence about long term rental or buying, it takes capital to purchase a home. Consider the upfront and ongoing costs of purchasing a home, excluded from a mortgage payment. Ongoing fees include biannual property tax assessments and general home maintenance.
For buyers that will finance a loan, besides a down payment, count expenses for inspections, appraisal, title insurance, home insurance and lenders fees. Homebuyers in SF often times waive inspections to submit a competitive bid. In this hot market it is extremely competitive with multiple offers and cash offers that go well over asking price.
The upside to buying a house? The tax advantages, pride of owning a home and building equity.
Rent or own in SF? In this market it boils down to what you are qualified for and if you’re ready for a serious commitment.