Years of rising housing prices have made it hard for many people to buy a home. They need to rent.
The situation is particularly acute here in San Jose, which has the biggest gap of any city in the country between the cost of owning and the cost of renting, according to a recent survey by the online financial marketplace provider LendingTree. The survey found that the median monthly rent in San Jose was about $2,454 compared to the median monthly cost for homes with a mortgage of $3,760, a difference of more than $1,300, or 34.5%. The average difference in the country’s top 10 metro areas was $945.
Earlier in 2022 the City of San Jose found something similar, estimating that a salary of $54 an hour was needed to rent the average two-bedroom apartment and $123 an hour to purchase the average home.
It’s true that housing prices have been trending down lately in many markets, but this has been offset by a rise in mortgage rates which make homeownership more expensive. As of December 1, 2022, a 30-year fixed rate mortgage was 6.49%, up from 3.11% a year earlier. That makes a difference. Principle and interest payments on a $1 million loan with a 20% down payment and a 3.5% interest rate would be about $3,592/month; the same loan at 6.5% would be $5,056/month.
Rent vs. own? Everyone will make their own decision but it’s an easier one to make here where the cost differential is so big. Even in a city where the average tech salary is approaching $150,000, the numbers lean strongly in favor of renting for many people. At the same time, that big gap suggests there’s room for rents to move up.
Luckily for those looking for a place to rent, there are some great new projects underway or soon coming online downtown. That includes Echo, a 389-unit apartment building recently approved by the San Jose City Council, and TMBR @ Downtown West, a 250+ unit multifamily project. You can learn more by contacting us today.
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Opportunity Zone Disclosures
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