Here’s what I hear recently, “I’m happy enough with where I am, but I want to upgrade. What should I do?”
My response, “You don’t need to hate your house to outgrow it.”
You can remodel. You can move. You can upgrade your home by adding square footage or remodel what is there to make it prettier or function better. There is hidden math with moving up.
Curious whether upgrading actually pencils for you? Let’s run the scenarios.
One way to contextualize today’s affordability dilemma is through the lens of price-to-rent ratios.
For example, in West Newport, the average monthly cost to own a home at today’s values and interest rates can range from $8,200-$100,000+, while a comparable property may rent for closer to $5,400-$29,000.
When those numbers stay relatively aligned, housing values tend to feel more sustainable. But when price-to-rent ratios become stretched — as they have in many markets due to elevated home prices and higher interest rates — it can point to a market where ownership costs are significantly outpacing rental value.
That dynamic creates an important question for homeowners and investors:
Is your equity positioned in the most efficient asset?
In some cases, the better opportunity may not be simply holding a property indefinitely, but instead repositioning equity into another market or asset class that offers stronger rental income, better cash flow, or greater long-term upside.
Sometimes the best move isn’t holding forever — it’s repositioning strategically.
The better question is:
Real estate should serve your life and your financial future — not the other way around.
If you’re curious about how your neighborhood’s price-to-rent ratio compares, or whether your equity could be positioned more effectively, it may be worth having a conversation.
Not every market shift requires action.
But understanding the numbers behind your property can help you make decisions from a position of clarity instead of emotion.
Low inventory markets create unique conditions.
Even when affordability becomes stretched, limited supply can continue supporting pricing. That’s why these moments are rarely black-and-white.
But low inventory also creates opportunity for sellers:
For some homeowners, this is the moment to simplify.
For others, it’s the moment to upgrade.
And for investors, it may be the moment to exchange one underperforming asset for a property with stronger income fundamentals.
In every real estate market, there are moments when the numbers start telling a story before headlines do.
One of the most overlooked indicators? The price-to-rent ratio.
Most homeowners know what their home is worth. Many investors know what rent rates are doing. But very few stop to compare the two — and that comparison can reveal whether a neighborhood is still financially efficient… or if it may be time to rethink strategy.
Simply put, the price-to-rent ratio compares home values to annual rental income in a neighborhood.
When property values rise significantly faster than rents, the monthly cost to own can become dramatically higher than the cost to rent the same home.
In some neighborhoods today, the estimated mortgage payment on a newly purchased property can be nearly double the market rent for a comparable home.
That gap matters.
Historically, when appreciation pushes values far beyond rental fundamentals — especially in areas with already low inventory — it can signal a market that has become more emotional than mathematical.
That doesn’t automatically mean values will fall. But it does raise an important question:
It’s the beginning of a new year!! Time to look at how our market has changed over the course of the year.
Rates
As Jerome Powell’s term comes to a close, the Fed is under significant pressure to lower rates. If employment issues continue to grow, the Fed will likely have greater opportunity to cut rates and potentially create opportunity for lower rates. However, if Trump is able to push for banks to put a cap on interest rates for credit cards, credit might be harder to come by including mortgages.
Rent growth 2026
Because inflation has still been relatively high, most landlords will be able to increase rents by 8% until July 31, 2026. That is a drop by .9%. The general rule of thumb is 5% plus CPI with a cap of 10%. This doesn’t mean that all rents are up by 8%. Rent growth both nationally and locally is supposed to by relatively flat aside from those that are under market.
Year over Year changes in Sales Price
This past year, our average sales price held with a few peaks through our high sales season. With the optimism of lower rates on the horizon, oftentimes, the same home becomes more affordable with refinance opportunities. In areas like coastal Orange County where property is generally perpetually desirable, we are less likely affected by the threat of unemployment. We are also likely to benefit from the upcoming legislation in Los Angeles County between the mansion tax, red tape frustration and rent control.
Affordability
Affordability has improved by about 5%. We continue to improve affordability even if only by a marginal amount. If employment continues to be a challenge, which should give the Fed room to reduce rates, affordability should continue to improve.
Inventory
Inventory and months of supply has been trending back down by about 17%. The market is certainly buoyed. We have a lot of elements trending back into the sellers favor: interest rates, affordability and lower inventory. .
Year over year volume of sales
One of the bigger jumps is the volume of sales. At over 25% jump in the volume of sales, our market is certainly still moving. Demand continues to be strong. People still like housing as an investment. And people still need a place to live.
List price versus Sale Price
This ratio stayed very tight ranging from 97-98% of purchase price. Many sellers have proven that they’d rather pull their homes from the market, or rent their home if they aren’t getting the number they want. However, moving forward, we may begin to see a bit of a divergence where some homeowners who are affected by employment struggles or turned their home into an ATM machine might be under pressure to sell and forced to find the market. This is likely to be a small percentage of the market, but there will be some.
Year over year changes in days on market
Average days on market didn’t change much. Properties were generally on market for less than 70 days suggesting strong demand.
On another note, it is the season of giving. Did you know that there are ways to give, just by choosing where your dollar goes?
My favorite way to do this is to eat at Ocean Friendly restaurants. The Surfrider Foundation, an organization dedicated to the protection and enjoyment of the world’s ocean, waves, and beaches, for all people through a powerful activist network, has an interactive map to help find ocean friendly restaurants.
Some of my favorite local restaurants commit to ocean friendly practices. A few examples are Lido Bottle Works, Breakfast Republic, The Deck, Harvest at the Ranch and many more!! Click the link below to give this season with simply choosing where to eat!!! Surfrider Ocean Friendly Restaurants
As we navigate the thick of the holidays and we think about friends, family and the year or years we’ve had together, I want to also take this time to look back at some home trends from the past.
HGTV did a really sweet article about some fun trends over the course of the last 25 years. If they hadn’t come out with this article, I think I would have completely forgotten about Shabby Chic and Industrial Design.
For more fun reminders of the past, click the link below!!
Here is the takeaway from the article:
More Californians can purchase a home in third-quarter 2025, compared to previous quarter and a year ago, C.A.R. reports
Now, this isn’t an exact reflection of our local market. However, it does demonstrate that our market has a larger pool of buyers. With a larger pool of buyers we should have corresponding growing demand. The growth in Orange County was marginal, but it is still positive for our path moving forward.
| Qtr. 3 2025 | C.A.R. Traditional Housing Affordability Index | |||||||
| STATE/REGION/COUNTY | Qtr. 3
2025 |
Qtr. 2 2025 | Qtr. 3 2024 | Median Home Price | Monthly Payment Including Taxes & Insurance | Minimum Qualifying Income | ||
| Calif. Single-family home | 17 | 15 | 16 | $887,380 | $5,590 | $223,600 | ||
| Calif. Condo/Townhome | 27 | 25 | 25 | $649,990 | $4,090 | $163,600 | ||
| Los Angeles Metro Area | 16 | 14 | 15 | $837,060 | $5,270 | $210,800 | ||
| Inland Empire | 23 | 21 | 22 | $595,000 | $3,750 | $150,000 | ||
| San Francisco Bay Area | 22 | 20 | 21 | $1,295,000 | $8,150 | $326,000 | ||
| United States | 36 | 35 | r | 35 | $426,800 | $2,690 | $107,600 | |
| San Francisco Bay Area | ||||||||
| Alameda | 21 | 19 | 18 | $1,250,000 | $7,870 | $314,800 | ||
| Contra Costa | 26 | 23 | 25 | $860,000 | $5,420 | $216,800 | ||
| Marin | 22 | 19 | 20 | $1,612,500 | $10,150 | $406,000 | ||
| Napa | 16 | 15 | 15 | $940,000 | $5,920 | $236,800 | ||
| San Francisco | 22 | 19 | 21 | $1,626,500 | $10,240 | $409,600 | ||
| San Mateo | 18 | 16 | 17 | $2,080,000 | $13,100 | $524,000 | ||
| Santa Clara | 19 | 17 | 19 | $1,915,000 | $12,060 | $482,400 | ||
| Solano | 26 | 27 | 26 | $606,000 | $3,820 | $152,800 | ||
| Sonoma | 19 | 17 | 18 | $825,780 | $5,200 | $208,000 | ||
| Southern California | ||||||||
| Imperial | 26 | 27 | 28 | $418,500 | $2,640 | $105,600 | ||
| Los Angeles | 12 | 13 | 11 | $954,130 | $6,010 | $240,400 | ||
| Orange | 13 | 12 | 12 | $1,400,000 | $8,820 | $352,800 | ||
| Riverside | 23 | 21 | 21 | $625,000 | $3,940 | $157,600 | ||
| San Bernardino | 29 | 29 | 29 | r | $497,800 | $3,130 | $125,200 | |
| San Diego | 13 | 13 | 12 | $1,009,500 | $6,360 | $254,400 | ||
| Ventura | 16 | 14 | 13 | $926,000 | $5,830 | $233,200 | ||
| Central Coast | ||||||||
| Monterey | 9 | 10 | 10 | $1,001,500 | $6,310 | $252,400 | ||
| San Luis Obispo | 13 | 12 | 11 | $929,350 | $5,850 | $234,000 | ||
| Santa Barbara | 12 | 10 | 13 | $1,220,000 | $7,680 | $307,200 | ||
| Santa Cruz | 14 | 14 | 14 | $1,304,220 | $8,210 | $328,400 | ||
| Central Valley | ||||||||
| Fresno | 30 | 30 | 30 | $443,000 | $2,790 | $111,600 | ||
| Glenn | 37 | 39 | 40 | $365,500 | $2,300 | $92,000 | ||
| Kern | 31 | 30 | 30 | $400,000 | $2,520 | $100,800 | ||
| Kings | 34 | 34 | 33 | $377,000 | $2,370 | $94,800 | ||
| Madera | 32 | 31 | 31 | $446,750 | $2,810 | $112,400 | ||
| Merced | 27 | 26 | 27 | $427,250 | $2,690 | $107,600 | ||
| Placer | 31 | 30 | 30 | $675,000 | $4,250 | $170,000 | ||
| Sacramento | 28 | 27 | 26 | $550,000 | $3,460 | $138,400 | ||
| San Benito | 26 | 22 | 21 | $750,000 | $4,720 | $188,800 | ||
| San Joaquin | 29 | 26 | 25 | $545,000 | $3,430 | $137,200 | ||
| Stanislaus | 28 | 26 | 29 | $485,000 | $3,050 | $122,000 | ||
| Tulare | 33 | 30 | 31 | $380,000 | $2,390 | $95,600 | ||
| Far North | ||||||||
| Butte | 27 | 24 | 29 | $461,000 | $2,900 | $116,000 | ||
| Lassen | 52 | 46 | 52 | $257,500 | $1,620 | $64,800 | ||
| Plumas | 30 | 34 | 23 | $466,500 | $2,940 | $117,600 | ||
| Shasta | 35 | 33 | 34 | $375,000 | $2,360 | $94,400 | ||
| Siskiyou | 35 | 37 | 36 | $329,500 | $2,070 | $82,800 | ||
| Tehama | 35 | 29 | 38 | $341,500 | $2,150 | $86,000 | ||
| Trinity | 34 | 30 | 34 | $302,480 | $1,900 | $76,000 | ||
| Other Calif. Counties | ||||||||
| Amador | 36 | 35 | 38 | $437,500 | $2,750 | $110,000 | ||
| Calaveras | 34 | 33 | 31 | $472,000 | $2,970 | $118,800 | ||
| Del Norte | 34 | 29 | 28 | $384,000 | $2,420 | $96,800 | ||
| El Dorado | 29 | 27 | 27 | $690,000 | $4,340 | $173,600 | ||
| Humboldt | 25 | 23 | 23 | $446,620 | $2,810 | $112,400 | ||
| Lake | 29 | 34 | 35 | $358,250 | $2,260 | $90,400 | ||
| Mariposa | 29 | 26 | 27 | $425,000 | $2,680 | $107,200 | ||
| Mendocino | 26 | 20 | 18 | $470,000 | $2,960 | $118,400 | ||
| Mono | 7 | 8 | 7 | $1,079,000 | $6,790 | $271,600 | ||
| Nevada | 30 | 27 | 26 | $550,000 | $3,460 | $138,400 | ||
| Sutter | 28 | 27 | 28 | $455,000 | $2,860 | $114,400 | ||
| Tuolumne | 36 | 38 | 40 | $430,000 | $2,710 | $108,400 | ||
| Yolo | 25 | 22 | 24 | $620,000 | $3,900 | $156,000 | ||
| Yuba | 28 | 26 | 27 | $437,000 | $2,750 | $110,000 | ||
Projects that you might choose to sell your personal home can be drastically different from what you might choose to do in order to sell your rental property. For example, to sell a single family home, you might consider changing countertops, paint, flooring and hardware. However, if you’re selling a rental property, that might be what my family calls “SEP”: someone else’s problem. In this case, the problem belongs to the tenant and often it is sufficient for them.
So what should a landlord consider as a capital expenditure project prior to listing a property? You can start with your major systems. Oftentimes a lot of landlords are not first time home owners and they have some experience with roofs, HVAC systems and water heaters. You can also consider what are the least appealing calls to get as a landlord. I might put a roof leak at the top of my list. Nothing like having a simple roof leak expand into a much more significant problem. The last thing I might consider would be the curb appeal. Re-imagining landscape and fencing such that both a new owner and a tenant are happy to walk the property is certainly a great way to invest in your investment property.
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