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Rent or Buy? An Honest Look at the Real Estate Market

May 5, 2023

Rent or Buy? An Honest Look at the Real Estate Market

For many people, owning a home is a key part of the American dream. Nearly three-quarters of Americans believe that owning a home is a higher measure of achievement than having a successful career, raising a family, or earning a college degree. According to the National Association of Realtors (NAR), owning a home builds financial security. The net worth of an American homeowner is almost 40 times the net worth of a non-homeowner.

Rental Rates Continue to Rise

According to Fannie Mae, almost 70% of renters would purchase a home if their lease ended now. This makes sense, as rent prices continue to soar in many parts of the country. The average price for a one-bedroom apartment in Southern California is 18% higher than it was last year. Rental price increases will likely continue.

During the pandemic, many landlords had rental rate freezes placed on their properties. These freezes have lifted now, giving landlords the freedom to increase rent prices at will. The University of California Lusk Center for Real Estate predicts continuing rent increases over the next two years.

Is It A Good Time to Buy A Home?

Data suggests the housing market has stabilized. As inflation rates slow, mortgage rates are dropping. Currently, 30-year, fixed-rate mortgage rates average 6.43 percent nationwide. Mortgage rates are even lower for first time homebuyers thanks to mortgage rate discounts instituted by Fannie Mae and Freddie Mac.

Despite the benefits of owning a home, many prospective buyers hesitate due to high interest rates, low home supply, or lack of large downpayment. However, first-time buyers shouldn’t wait. Now is the best time to purchase a home.

Low Down Payments & Greater Chance of Approval

First-time buyers can purchase a home without saving for a 20 percent down payment. In addition to low down payment mortgages, buyers can access down payment assistance through their local housing office.

Getting a mortgage without a big down payment has never been easier. Mortgage lenders recently lowered minimum credit score requirements for FHA, USDA, and VA mortgages. In addition, Congress passed a law to change the way that medical debt is factored into credit scores, raising FICO scores by an average of 22 points.

Low Inventory Will Bring Home Prices Up

Low inventory will likely bring home prices up over the next month and into next season. According to NAR, each state averages less than 20,000 homes for sale each year despite high demand. 57% of homes listed for sale in the U.S. are sold within a month. The supply of existing homes for sale is 2.6 months nationwide. Prospective buyers should act fast to ensure the best price.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

Category: BlogTag: california, california home sales, california homes, home prices, home sales, housing market, housing trends, real estate, real estate market, real estate trends, rent, rentals, southern california real estate

Will Home Prices Go Down?

September 14, 2022

Will Home Prices Go Down?

Analysts, home shoppers, renters, homeowners are all wondering whether home prices will reduce at the same margin that costs to build go up.  There are conflicting answers however. Looking closely at housing demand we see the need increasing, not decreasing.   With rent, land and the cost of construction going up, it’s hard to say “no” to owning a home today.  When asked if rent will increase over the next 7 years, you will have a hard time finding someone that would say “the cost to rent will be lower”.

In seven years, home prices will not be lower from today. It’s unlikely anyone believes they will. The price adjustments occurring now will be small and mainly for homes that had unrealistic prices to start with… let’s face it, it should never cost $800,000 to live in Boise!

Instead of waiting for home prices to go down, prospective buyers are weighing the pros and cons and taking action now.  Many sellers are offering attractive financing packages to create a more affordable payment.  The rule is: If you can afford the payment on a 7-to-10-year fixed loan, fix your payment now and take advantage of the tax deductions that you won’t get with renting. Statistically, most homeowners move every 13 years according to the National Association of Realtors.

Take a look at the recent data from the Mortgage Bankers Association (MBA), which proves all of the above to be correct.

Tax Breaks for Homebuyers

High demand for rentals continues to drive rent prices up with zero deduction to the tenant, while building wealth for the property owner.  It is no secret that one of the cornerstones of building wealth is investing in real estate.  Anyone looking for tax breaks should consider buying a home instead of renting.

Homeowners can take advantage of several tax deductions including:

  • Mortgage Interest Deduction
    Homeowners can deduct interest paid on a loan related to building, purchasing, or improving their primary home up to $750,000.
  • Mortgage Points Deduction
    Homebuyers pay “points” to their lender when they take out a mortgage. These points are a form of prepaid interest paid up-front in exchange for a lower interest rate. In most instances, mortgage points are fully deductible the year they’re paid.
  • State and Local Taxes (SALT) Deduction
    The SALT deduction allows property owners to deduct payments made for property taxes and income or sales tax payments up to $10,000.

Housing Affordability

For renters, the choice to buy often comes down to affordability. Average rent for a vacant unit in Orange County jumped to $2,570 per month in 2022, up 18.5% from the spring of 2021. Most Southern California renters are already paying more than they would for a 30-year mortgage. This makes a 7-to-10-year fixed mortgage a feasible option for many renters.

Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.

 

 

 

 

Category: BlogTag: california, california home sales, california homes, home prices, home sales, housing affordability, housing market, housing trends, real estate, real estate industry, real estate market, real estate trends, rent

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