Should You Continue Renting or Should You Buy - Simon Salloom

Several times a week someone tells me, "My friends say wait to buy because the market is going to go down this year." I am sure these same friends were telling these same people the same thing last year. Let's focus in on Santa Monica Condominium sales for example. Last year, when the "bubble" was bursting median sales prices went up 12.3%. The median sales price for all types of real estate in Los Angeles went up 7.3%. Yes, the number of sales went down from 8,269 in 2005 to 6,888 in Los Angeles and average days on market went up from 41 to 57 days. However, 2005 was a record year for real estate sales. The fact that the pace of sales decreased in 2006 means the market shifted from going a metaphorical 100 miles per hour, a pace that is impossible to maintain, to a more sustainable 70 miles per hour. Let's say for example that you didn't listen to your friends or the media and purchased a home last year for $700,000. At the median increase in value of 7.3%, you would have enjoyed about .6% or $4,200 a month gain in equity. Another misconception is that it is better to rent now than to own. It may be better to rent if you don't plan on being in the same place for more than a year or two or if you just moved to Los Angeles or Santa Monica and don't know what neighborhood will work best for you. There are also some people who can't come up with the money every month for the mortgage, taxes and home expenses. For all the rest of you, households making a combined income of about $90,000 a year or more, it is a good business decision to buy. Thanks to the media created "bubble" hype, and an ever increasing demand for shelter in Los Angeles, rents have increased about 12% citywide in the past year. Many rental seekers have said they see closer to a 15-20% gain on the Westside and in Santa Monica. You can buy a very nice 2br condo in a great Santa Monica neighborhood for around $700,000. This same condo will now rent for around $2,800-3,200 a month. To own it, with a 6.25% interest rate, taxes and $300 a month in dues, it will cost you approximately $4,900 a month. However, after taxes at 30% (many people pay more), your effective cost is about $3,100 a month. If you hold onto this same property for the next five years and enjoy a modest 3% or $21,000 increase in value per year, you will make over $100,000 in equity. If you sold and paid about 6% in closing costs, clearing $40,000, your effective cost of homeownership is only about $2,400, less than renting and a steal of a deal if you consider that rents will also be going up over the same period. So, the next time a newscaster on CNN or a friend at the coffee shop tells you it's a bad time to buy just hand them this article or have them contact me via my web-site: www.SantaMonicaSimon.com Simon Salloom is a Realtor who specializes in Santa Monica Real Estate with Coldwell Banker Residential Real Estate Brokerage, Brentwood Court Office. He is ranked in the top 3% of Coldwell Banker agents Nationwide for sales volume. Contact me via my web-site: www.SantaMonicaSimon.com All statistics taken from the Multiple Listing Service of the local, Beverly Hills Greater Los Angeles Association of Realtors.