Thoughts on Rent Inflation

May 26, 2022

Housing prices have commanded a huge share of our attention these last few years, but recently rents in L.A. County jumped 16% from last year. Even with mortgage rates hovering around 5%, purchasing a property continues to be an attractive proposition and is still a hedge against inflation.

For example, here are the median rents for leases in L.A. County as of May for the following categories: Apartments – $2,595, Apartments/Condominiums/Townhomes (ACTs) – $3,300, and all residences including single family homes – $3,700. (Source: CRMLS, which shows higher median figures than the L.A. Times.)

The median sales price in L.A. County in May for the following categories are: For ACTs – $690,000, and for all residences – $899,000. (Source: CRMLS.) 

At these prices, with 20% down and a 5% 30-year fixed mortgage, the principal and interest payment for ACTs is roughly $3,000, and for all residences is $3,900. These figures do not include property taxes, which would be roughly $8,600/year for ACTs and $11,300/year for all residences, and are partially tax deductible. There is also a tax deduction for mortgage interest which is included in the mortgage payment.

While rents would continue to rise over time, your P&I payment would remain the same throughout the term of a fixed rate mortgage – hedging against inflation, while building equity in your home.

When you and your family, friends and neighbors are ready to buy in today’s market, contact me and we will find the right home or investment for each of you.

Best wishes this Memorial Day weekend,

Jonathan

© Jonathan Sarrow, 2022