Rents are still very high in SF and prices for properties appear to be stabilizing. Now is the time to buy instead of rent because it is actually less expensive on a monthly basis in some instances to own rather than rent in the city right now. A client of mine rents a two bedroom apartment in Pacific Heights for $8500 a month. For what she pays in rent, she could pay less than that for a mortgage and expenses and buy a two bedroom condo in the same neighborhood!
The average price for a two bedroom condo in Pacific Heights in the last six months is $1,434,406. If she put down 20% on an average priced condo, the monthly cost for her mortgage, real property taxes and HOA fees (which would likely be in the range of $500 – $700, depending on the building) would be between $5600 and $5800. She would not only be living in a place she could call her own and building equity but she would have almost an extra $3000 a month to invest.
For a first time buyer, let’s take a look at one bedroom apartments in SF. They average about $3500 a month to rent. A cute one bedroom condo I sold earlier this year at Opera Plaza sold for $620,000. If a first time buyer put down 20% or $124,000 for this condo, his or her mortgage would be $496,000. The monthly mortgage cost, real property taxes and HOA dues of $743 would be about $3000 a month. At this monthly cost, a first time buyer would be paying less to own than to rent and would be building equity. For 10% down, the cost per month would be about $3185 a month plus mortgage insurance, which in this case would be about $150 a month, making it $3335 a month, still less than rent. When putting less than 10% down, the cost of mortgage insurance may be added to your monthly cost to protect the lender from you falling behind in your payments.
The rub is the downpayment: for the two bedroom condo, it would be $286,881 at 20 percent down; and for the one bedroom condo, it would be $124,000 or $62,000, depending on whether you put 20 or 10 percent down. It certainly takes quite awhile for most people to save this kind of money but some, often with the help of a “gift” from parents, are able to do it. For those on the fence with substantial savings, now is a great time to buy. To make sure you get the return on your home investment, stay put for at least 5-7 years!
