This question is now a very large issue for many people who own homes in Riverside County as well as the rest of Southern California and most of the nation. The real estate sales market has slowed dramatically and many people are faced with long marketing time and lower prices. If you are an investor who bought a home fairly recently with the intention of selling it at a higher price,  seriously  look at the rental option. If you are a longterm homeowner with equity and a possible need for that money in the near term, you should seriously consider selling your home and doing whatever it takes to get your equity out now. The sooner the better.

I have been selling and managing real estate since 1988. I have experienced two very good markets and now two very bad markets. Real estate is cyclical and the cycles usually last about 5 years whether up or down. The very bad market 1990-1995 was both a normal cyclical downturn compounded by economic problems. This market is starting off just as a cyclical downturn. Real estate, like the stock market, goes up and when it starts rising too high too quickly the media starts talking about bubbles. The buying public begins to worry about buying at the height of the market and fear begins to permeate the market. The slow down causes more media attention and before you know it, no one is buying homes. Sellers and their real estate agents get frustrated and scared, and people begin to drop their prices in order to sell. Many prognosticators talk about a soft landing, however soft landings are rare. Usually prices after a large rise will take a good size fall. The good news is that real estate, historically, especially in Southern California, has been the best investment anyone can make. Prices that seemed incredibly high in 1990 are now twice as high. What we once believed as impossible prices to achieve are now commonplace even though wages have not kept up with the rise in prices. Lower interest rates and new lender programs have made house buying affordable.

That is why I advise people with near term money needs and equity to sell, and those who do not have short term money needs, or little equity, to hold on and rent your home out. Even if you run a large negative on your monthly payment you should hold onto the house. Say you have a $700 a month negative. That is a loss of $8400 a year. Over 10 years that is a loss of $84,000. If you look at housing prices over a 10 year period you would have to assume that $84,000 loss would pale in comparison to the gain in appreciation and equity. You also need to factor in the true negative cost after tax deductions for everything related to the house. In turning the house into a rental you are entitled to deduct all costs including property management.
 
For those thinking of renting out their home, you should know that the Temecula, Murrieta, Lake Elsinore, Wildomar, Canyon Lake, Perris, San Jacinto, Hemet, Menifee, Winchester, and Romoland rental markets has been excellent for years. My only concern is the slow down in building and the loss of construction related jobs which has made up a large portion of the local economy. You should also be aware that an enormous amount of homes in this area were bought by investors with the sole intent of renting them out. That has created a great deal of competition and lower prices for rent. I hope this analysis helps you with your decision.

If you have questions, or comments, or are interested in finding out about our property management services or selling your home please call me or email me:

Jeff Schlansky

Office (951) 506-9683
Email: cabest1@verizon.net

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