Something’s not quite right with the housing market in San Diego. An uncommon thing is happening throughout San Diego County: a monthly mortgage payment is now less than a rental payment on homes that are comparable to one another in size and value. Because taxes are included in a monthly mortgage payment, it causes the mortgage payment to be much higher than renting a home. Despite this, mortgage interest tax credits and a preference for buying over renting cause there to be much more of a demand for homes. In turn, people pay more for homeownership. Landlords often have to keep their rental prices down to draw tenants to their properties.

When the increase in foreclosures began back in 2007, many people in San Diego became wary of purchasing a home because of decreasing home values and a fear of losing their homes to foreclosure. A lot of people that are interested in purchasing a home are unable to do so because they don’t have decent credit. Many foreclosed homes were purchased by investors to use as rental properties, but even though there has been an increase in foreclosures, investors can’t keep up with the demand for rental properties. Home prices decreased 40% from 2005-2009; foreclosures and short sales increased as a result. Homeowners that lose their homes to foreclosure or via a short sale are unable to purchase a home again for a certain amount of time, so renting is really their only option.

Because of this increase in demand for rental properties, housing prices have drastically decreased, as have mortgage interest rates. These two key components working together have made it easier to own a home in San Diego than to rent one. For example, if a buyer can get a 3.9% interest rate on a 30 year loan and put down 20%, their mortgage payment will be lower than a rental payment on a home of average price. If home prices or interest rates start to increase again, the market will more than likely return to normal