Why should more people be buying homes in Southern California this year?
Millions of potential homeowners are still sitting on the sidelines. Many are beginning to feel the pinch of remaining as renters or couch surfing. Those that haven’t will soon. For a variety of reasons, this is a critical time for buying a home in Southern California, and especially for those that already live in, or plan to move to San Diego County in the next 10 years.The following list highlights 7 reasons to buy a house in Southern California this year:
1. Mortgages
The benefits of today’s low home loan interest rates can’t be ignored. Consider that the difference in interest paid over the life of a $500,000 home loan from 4.5% to 7.5% interest means paying a whopping $346,553 more, or $758,586 just in interest. This is in addition to having to pay an extra $1,000 each month in principal and interest mortgage payments.
Recent surveys also show that many home buyers don’t realize how little they may have to put in down payment on a new home, and are unaware of new, easier mortgage programs. According to U-T San Diego, Navy Federal Credit Union has begun to offer 100% home loans to SoCal home buyers again.
2. Low Home Prices
Southern California home prices may not feel low to some buyers, especially those that have seen them rise over the last couple of years. Yet, historically they are relatively low. Some homes are still trading 50% below their previous highs. While these deals may be far fewer, and further between, there are still many great deals available. Unfortunately, they won’t last. Within a couple of years, San Diegans can expect local home values and competition for homes definitely looking a lot more like San Francisco and LA.
3. Once in a Lifetime Opportunity
With the bright outlook for the U.S., and specifically San Diego County’s housing market, this truly a once in a lifetime opportunity for the average home buying aged American today. Those that do live long enough to see market conditions this good again will more likely be shopping for rooms in retirement homes.
4. Passive Wealth Building
One of the best reasons to buy homes in SoCal now is for the passive wealth building. This can’t be underestimated. Trillions have already been added to national net worth thanks to rising California home values, and many trillions more will be stacked on top over the next decade. This isn’t really about making more money for most. Growing San Diego home values will help owners to beat inflation with their savings and investments, grow a substantial nest egg for retirement, and provide access to critical cash for life emergencies, and even children’s college funds. For many buying now, growing equity will be the only hope they have of ever being able to come up with the down payment for their real dream homes.
5. Improving Investment Returns
Those who already have made a start on investing or retirement savings can also benefit from moving a larger percentage of their portfolios over to the safety of enhanced returns the SoCal property market offers. This is even more critical for those currently invested in a frothy stock market. This can get even better when self-directed IRAs and 401ks are used to invest in real estate.
6. Escaping the Renter Trap
Many millions of dollars have been invested in manipulating the media to convince renters they are better off as tenants, than attempting to buy a home. There is a time when everyone may be better off renting. That doesn’t mean it is a smart or sustainable long term strategy for anyone. Rents are up, and they are heading even higher. Those that don’t act and buy will not just pay more for the roof over their heads each month, and over their lifetimes, but are risking being priced out of the areas they most want to live in. If they get priced out of buying due to missing low interest rates and home prices, they will become captive lifelong tenants at the whims of landlords that will keep pushing up rents, and may slack on maintenance.
7. Tax Benefits
While these benefits change over time, and may differ between home buyers and homeowners, there are many tax advantages to buying a home. This can range from closing cost and mortgage interest deductions, to breaks on capital gains, and more. Many may not prioritize taxes at first, in favor of income. However, taxes can ultimately make a double digit difference in what is left to really take home and is available to spend.
Some of the best times for buying a Southern California home are just ahead. Just make sure you are prepared, and act fast when you find a good buy.
