Hi Kathy:

I’m renting in Mission Valley but I really do want to have home ownership. I keep reading about the market going from a seller’s market to a buyer’s market. The interest rates have been slowly rising. The current political administration is very controversial right now, and foreign relations in combination with stock markets … I am so confused. How would you advise a renter when to purchase?

— Lenny T.

Hi Lenny:

Trust me when I say you are not alone. No one can predict what will truly happen but the market has shifted based on more homes being available, and interest rates that have been on the rise. As of recently, early January, they took a slight dip to about 4.5 percent. However, historically, that is still advantageous for a buyer. We all knew that 3 percent was not going to be around forever. Those that could take advantage did. Lucky them.

My own personal home is locked in at 4.2 percent, which is great. Unfortunately for me, I could not refinance to the 3 percent interest rates that were being offered, due to my own personal situation. But you know what? I still own my own home and I still get the tax benefits and I still have equity.

Home ownership is the American dream that many of us hope to obtain. According to the California Association of Realtors (CAR) on homeownership, here are some interesting stats:

1. 21 percent of renters feel that homeownership provides a good long-term investment. What prevents them: Only 40 percent of renters are familiar to the credit and loan criteria needed to purchase a home.

2. 2.19 percent of renters feel that homeownership gives them the freedom to do what they want with their home. However, 14 percent of renters are under the impression that you need more than 50 percent down payment to purchase a home.

3. 12 percent of renters feel that home ownership allows them stability to plant roots. Yet nearly 40 percent of California renters believe that more than 20 percent is required to become a homeowner.

According to the CAR 2018 State of California Consumer Survey, these misconceptions result in many renters delaying their home purchase or giving up on the dream of homeownership.

Lenny, you should really sit down and plan if you want to purchase a home and consider the benefits of both. When you rent, you have the flexibility to move out and you are not responsible for any repairs and maintenance. You can take time to work to save for down payments. You do not have to worry about homeowners association fees or Mello-Roos tax which increase monthly mortgage payments. Also, you can take time to build your credit and, if need be, work on your FICO scores.

When buying, you get the tax benefits associated with homeownership. Over the long haul and based on real estate prices, you can build equity and hopefully plan for an easier retirement. Your payments are generally fixed and you do not have to be susceptible to rent hikes or answer to landlords.

Another article written in youstaywealthy.com had statistics relevant to San Diego:

Owning a home in San Diego: Around 50 percent of people in San Diego are homeowners;

The average monthly mortgage payment in San Diego is $2,475; the gross monthly income you need to afford to buy in San Diego is $12,680.

Renting in San Diego: Around 50 percent of people in San Diego are renters; the average monthly rent in San Diego is $1,743; the gross monthly income needed to rent (30 percent of income) is $5,281.

Lenny, if you keep reading my articles, I will always tell you to buy now with what you can afford. The advantages of home ownership can be great and advantageous. Always consult a professional Realtor and a recommended loan officer to help you figure out your financials. Great question and best of luck.

—Kathy McSherry is a Realtor at Compass. Email your questions to [email protected] or call 702-328-9905.