Is it still a good time to buy? Are you loving this real estate market? Who is buying homes at these crazy high prices?
These are some of the questions I’ve been getting from my clients recently and I’m sure many of you are wondering this too. So let’s dive in.
Is it still a good time to buy?
Let’s take the following example. I was chatting with a client about a home that was on the market. It was listed for $640,000. The average annual appreciation is 5.9% in San Diego.
Option 1: Buy and Hold
If you were to buy and hold, here is the value it could be in:
Year 1 – $640,000
Year 2 – $677,760
Year 3 – $717,748
Year 4 – $760,095
Year 5 – $804,941
That’s almost $165,000 gained in 5 years plus an estimated $66,000 in mortgage reduction paid off, which you don’t get back when you’re paying rent.
Option 2: Wait
On the flip side, if you were the buyer and decided to wait, at what year would you buy it? In one year, two years? What would the payments be at that time with higher interest rates?
I could go through all the math but long story short, the payment could be an estimated $600 more per month to buy the same house if you waited to buy in 2 years. Would you be better prepared for that two years from now?
Are you loving the real estate market?
The real estate market has been hot. If you’re a seller, you’ve been reaping the benefits. However, there are many buyers out there that have entered and left the market empty handed. Buyer fatigue from bidding wars and rising prices have caused many buyers to resign to renewing their lease for another year.
People who have an “extra” home to sell, such as a second home or rental property have benefitted the most in this market. But there’s eviction moratoriums tying up the market so refer to #4 below to read more about that.
Now, if you are a buyer, there’s still hope! Because buyers are bowing out of the market, there are fewer offers being made. They are strong offers, but not as many. Days on market is starting to increase and price reductions can be spotted as sellers become less aggressive on their listing price.
Keep an eye out for homes that go pending and then come back on market. The second time around, you will likely have less competition. Sellers are also more agreeable about price and repairs since they have already been through the emotional roller coaster of falling out of escrow.
Work with an amazing real estate agent (like me!) that can help you find off market deals. Be quick and open to these opportunities when they arise. And as the market cools off, that’s the time to jump in.
Who is buying homes at these crazy high prices?
This is another question I get asked a lot. People are seeing homes in their neighborhood go well above asking price. I saw one go $300K over asking price the other day.
People are continuing to move to San Diego, especially from the Bay area and our prices are pretty “affordable” compared to what they are used to paying. First time homebuyers that have saved up money are in the market to buy. They may be liquidating from their 401Ks. or receiving help from family to put up the cash for their first home purchase. Buyers are looking for more suitable homes to bring their elderly parents or loved ones to live with them. Investors are buying homes to bring them up to par, and then putting them back into the market.
I want to sell my house but the tenant refuses to vacate
There is currently a moratorium on removing a tenant unless there is an imminent health and safety risk. Refer to San Diego Ordinance 10724 and speak with a real estate attorney to discuss your options.
Some landlords have offered cash for keys to entice their tenants to move but they are still not moving out. The rental market is also starving for inventory due to ongoing eviction moratoriums. Be careful about serving notice to your tenant. There are restrictions in the ordinance 10724 so check with your attorney first.
However, if you are working on a cash for keys agreement with the tenant, the going rate seems to be $4,000-$10,000.
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