Orange County

AOA News and Buyers Guide • Orange County • November 2022 • (714) 539-6000 52 by Mercedes Shaffer White Hot Rental Market W hile the housing mar- ket has been cool- ing off mostly due to higher interest rates, the rental market is white hot! Bidding wars on rentals are driving up the market for newly listed prop- erties. When the pandemic hit, we had historically low inventory throughout California, histori- cally low interest rates and huge buyer demand. This resulted in red-hot housing markets where properties appreciated in price between 20-40% year-over-year. The sharp increase in home prices, coupled with competition from all-cash buyers, pushed many fist-time buyers out of the market entirely and even side- lined some deal-seeking inves- tors. An entire cohort of would- be-buyers had to remain renters, creating an even greater demand for rental housing, which in-turn drove up rental prices. Interest Rates Higher interest rates are helping to create another wave of renters. At the begin- ning of the year, when interest rates were at 3%, the monthly mortgage payment on the pur- chase of a $1M home with 10% down would have been $3,867 . With interest rates as high as 6% (and potentially going higher before the end of the year), that same $1M home purchase is going to have a monthly mortgage payment of $5,498 . That’s $19,572 more per year for the same home - a 42% increase. This increase in payments can have a signif- icant impact on a household’s budget. Many buyers who were shopping for homes at the be- ginning of the year, when inter- est rates were lower, but didn’t purchase a home either because they didn’t find what they want - ed (there wasn’t much to choose from) or they were out-bid on homes that they tried to pur- chase, no longer qualify for the same loan amount. To maintain the same $3,867 payment at a 6% interest rate with 10% down, a buyer would only qualify for a purchase price of $721,000 . If a buyer had trou- ble finding something they liked in the $1M price range, they’re not going to find something they like for almost $300,000 less, and to make matters worse, property prices have continued to rise steadily, just at a slower rate than last year. The cost of home ownership doesn’t just end with the mort- gage payment. Average annual taxes and insurance on a $1M home in California would repre- sent another $11,000+ per year and if you have HOA dues and/ or Mello Roos taxes, that could REPLACEMENT WINDOWS VINYLWINDOWS • DOUBLE PANE • LOW-E GLASS Top Quality • Energy Saving #1 Installation • LifetimeWarranty NAXAN WINDOW/DOOR 323-734-2700 NWC2033 GMAIL.COM FAX 323 734 2766 SHOWROOM 2033 Venice Blvd., Los Angeles, CA 90006 ONE CALL DOES IT ALL 10-WINDOW INSTALLED +TAX $ 2,499 Size Limit (up to 36”x36”)

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