It's cheaper to rent, so why are people buying?

 



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Introduction and Overview

 Okay, let's take a look at this. I'll open this up so you can see it. 

Buying vs. Renting: A Detailed Comparison

Buying versus renting. Now, of course, this is median prices all across the U. S. and we'll look at the median price, etc. Hang on a second. There, that's a little better. Buying versus renting in America with home prices and mortgage rates both rising in the U. S. has witnessed the biggest numerical gap in cost between owning a home and renting it over 50 years. Americans, however, have seen similar scenarios since the 80s. It's a true housing bubble. They called it back in 1982. They called it the dot com bust, and it wasn't really, but it did flatten out and plateau out a little bit.

But today, the median price to rent in the United States is 1, 845 per month versus their mortgage of 2, 700. And I have the link here in my blog, so just go to my blog and you can go here and take a look at it, or you can go to Visual Capitalist. Now why is it so much more expensive? Cost of living's gone up, inflation's gone up, everything's gone up, and it takes longer for rent to catch up.

Now, what is it here in the Bay Area? It's about 1, 600 per room. That's the going rate. If you rent them out individually, you can probably get a three-bedroom house for 3, 200, which is. Two times 60. Can you? Absolutely. It's expensive. It's very expensive to live here. It doesn't matter what you do, right?

However, if you bought a million-dollar house and put 20 percent down, you're looking at 56, 5, 700 a month. Why are people still moving here and buying houses? The assumption is that equity will continue to build. There's a knowledge of where you're going to live in the next four to five years.

You have some consistency of your rent being the same price. Unless you buy an option arm or a flexible mortgage at interest only that is stuck for three years it can change your life, right? Same with rent outside of California. We don't have Proposition 13 rents will go up because taxes will go up and when taxes go up There's nothing you can do about it. 

So do your payments. So the landlord gets pinched that means you get pinched and that's just the way life is So is it fair? No, it's not. Here's something to look at. 

Regional Housing Trends and Population Shifts
Population trend. Now, California is saying that they've only settled out negative two percent.

Bullshit. I don't believe that at all, what do I know? In Nevada, people have moved from California to Nevada, and  Oregon to Nevada. Same thing with Florida and Texas and what we're seeing in Texas and somewhat Arizona is a surplus of real estate, a surplus of listings.

So we're going to see price stabilization there. We're not going to see price stabilization in California, not for a while. Not until the whole economy takes a dump, right? Because 30-year fixed is 72 30 30-year jumbo is 7%. 

Interest Rates and Market Predictions

I got this new chart. I like this one a lot better because it doesn't push all this stuff.

And here are the historic rates.

Now I understand, I get it, but these are just a couple things back to 2025 or February 5th. I like this and it goes up and down and shows you the real-time numbers versus what I was showing you for the last couple of years. Treasury yield has a lot to do with where our rates are going. Now we've been inverted since the middle of 2024, which means that We're expecting rates to go down. They haven't yet because the Fed has kept it or maintained that rate. There's another thing saying that because we're seeing this inverse action, we should expect to see rates lower, right? It's the same thing here. When you see a giant change in the cost to buy versus the cost to rent, You should expect rates to change, which means we're going to catch up with the economy, which means the cost of buy is going to come down.

If the rates go down and cost of buy goes down.

Impact of Economic Factors on Housing

And here's a collapse in home buyer demand. This is the everything that you're hearing on the news. Mortgage applications to buy a house have decreased mostly because there's a lack of inventory, but also there are a lot of people who set it at two and a half three and a half four and a half percent Happy where they are and they're not going to refinance unless they absolutely positively have to just if you have a two percent rate You will not move unless you absolutely positively have to move for whatever reason this is low This is Applications are low because rates are high.

The only way to change that is to lower rates, which would free up a lot. But there will be an inverse reaction, right? Remember, I didn't bring it up. I'm just imagining it, right? When rates go down, houses become more affordable. Housing has become more affordable. It means you can buy more. That means more buyers enter the market.

That means there's more competition, so rates stay stable in certain areas. We went back over here. We said DC is having an issue because Trump is firing a bunch of people. So they're moving out, getting out of their swamp or whatever the hell they want to call it, but Florida, they have insurance issues.

It's 1 percent of the cost of housing right now for every year. So you're paying 10, on average, or 500, 000. You're paying 5, 000 a year for hurricane insurance. Same thing with Texas. Austin, there's a massive exodus from my understanding from Austin. People are getting out of there because the jobs dried up.

They all moved back to California. Is California the greatest place in the world? It's raining today and it was super crazy warm yesterday. And then the day before it was Arctic cold. And I don't know what we're seeing, but other things too. There are other reasons to move to different places like Tennessee Nevada Texas and Oregon don't have an income tax.

Correct me if I'm wrong. Washington doesn't have sales tax or vice versa, And a couple of other States have some other reasons that you'd want to move there. Just give me a tropical Island. Rates are not going to come down anytime soon. If they do, it'll probably be in April timeframe around tax time because we need to have something to prop up the market, and the economy.

This is just two or 3 percent of the GDP, right? We have a global war on terrorism. That's now in Ukraine Syria and Israel. And yeah, we have an almost trillion-dollar-a-year military budget in the U S and that's not going to go away soon. No matter what, if you're a war Hawk or not.

If you believe in war and believe in defending other people, that's totally up to you, but it's a train that is moving and it's very heavy and it's going to be hard to stop. I'll tell you that right now, leave it at that. So T bills are coming in a little bit higher than normal. That's good. That means we're seeing an inversion.

If you're thinking about moving out of California, down the street, or moving to another town, call me. Drop this home inspection checklist. Get your repairs done right now because it takes time to get stuff fixed. You can't call up a handyman and expect this honeydew list to be done in two days, it's going to take a while right now they're strapped.






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They're busy. We're assuming that we're going to see a big change in inventory in the next couple of months. We're right in the beginning of the selling season, March, April, and May. We're expecting things to happen on my handyman's busy my landscaper is busy and my painter's busy and I'm trying to choke him in for my listings right now and trying to get them going, but it's just taking time because they're busy telling you that months ago, I said, back in November, December, if you're thinking about selling in March, April, may get your honey-do list started right now REOs, we have 219 whole REOs or bank-owned properties in the bay area.

In all of California, we don't have anything in Santa Clara County. So I'm a tail count. We have San Francisco, but in Alameda County, it gets a little rich up in Antioch and Oakland. But yeah, if you're looking at some, a good price. Or a good deal. Don't expect a good deal on these because these things get snapped up really quick, especially in San Jose.





Homes near Apple. I did this earlier this morning, so I'm This is a standard, basic floor plan of a house. It's funny because 3, 000, 000 for 1, 500 square feet, it justoggles my mind, but it's true. Not my listing. Clifton Way, Cupertino, 3 million, three bedroom, two bath, 1, 459 square feet, built in 1960.

And I can't wait to take a look inside and see how original everything's been updated. Updated. You have. Black granite, maybe quartz. Not sure. It's not brand spanking new. I love seeing wood cabinets, not painted cabinets because it means it's just a few years older and it feels like they actually got to enjoy it, which I think is important.

Don't tell me that is a wall heater. Let's go take a look. Cooling

Doesn't say anything. Oh, ceiling fan 3 million and you don't even get an air conditioner. Thank you very much.

Itoggles my mind. I'm going to keep an eye on this one. We're going to see how this one does.




I would hate to see that thing go for 3 million. That would be crazy. Mountain view home of the week. I think it was this guy right here. Not this one right here. And the reason why I picked it is that it's newish, and it's one of those high-density homes, and it's within walking distance to Castro still, but you still get freeway noise, three bedrooms, three and two half baths, two and one-half baths.

This is Iris Drive, Mountain View, not my listing. 1800 square feet for 2. 2 million and it's been on the market for seven days. And again, you get to actually stroll down to Castro Street, have a nice dinner, and roll back home. There you go. I'd say 52 pictures, but I'm not going to be patient enough for this. So this is a multi-level or a tri-level.

You can see because right here you go down, that's actually the entryway. There might be a downstairs bedroom and a garage. There's your living area. And then upstairs. Is your kitchen and dining area just like you're seeing right here pretty standard layout 2. 2 million dollars. Thank you very much Morgan Hill.

Oh, what is this? This is 90 days on the market And I just looked at this going why is this thing still on the market original list price is 1. 25 This is four bedrooms three full baths, 600 square feet, 1. 15 The original list is two and a quarter. Not my listing. Christy Lynn, not Christy Lane, but Christy Lynn looks like it's a single-family house, but let's take a look attached.

That's why it's attached. Yeah. And, there's also an HOA,

so that's why this guy is trying to sell this. Let's see, compared to,
I know it's Morgan Hill, but Vito, everything else in Morgan Hill is expensive. Not really. There's another four bedroom, four bedroom, two bath. I want to say 18, 16 to 1800 for about the same price and it's detached. So be very careful when it says half, that's a half plex. I got one of those coming up.
So it's very important when you do something unique, like a half plex or an attached. Unit, it's going to take a little bit longer to sell. You have to be patient with it and you have to price it right because if you don't price it it'll just sit there and you're going to be on 211 days thank your agents and idiot.

So don't do that. 40 days on the market. We have 88 and 90 days on the market. We have 48 REOs in the Bay area, and  12 Bay area counties. We have 68 in all of California. We have 217. We have. Same story. No inventory. It's the beginning of the market. We should be fully flooded right now. We should be at least three-quarters B.

I have a feeling that it'll just catch wind around April.

That's my thought.

Conclusion and Final Thoughts

That's it. All right. Thanks for watching. I'm Vito with Abitano. We'll see you out there.







Vito Scarnecchia
Real Estate Broker, Veteran, Dad
DRE#: 01407676
408-705-6817
Vito@abitano.com
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