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1) Santa Ana's "price-to-rent ratio" is 41.9, indicating a significantly high level
Signal strength: strong
The price-to-rent ratio in Santa Ana is 41.9, which is considered high. This ratio is a key indicator that helps potential investors understand whether buying a property is financially sensible compared to renting.
When the price-to-rent ratio is high, it suggests that property prices are significantly higher relative to rental income. This means that the cost of buying a home is much greater than what you would earn from renting it out.
In such scenarios, investors might not see a good return on their investment if they choose to buy. Instead, they might find that renting is a more economical choice in the short term.
If the price-to-rent ratio were closer to 15, it would indicate a more balanced market where buying could be more advantageous.
Sources: USCensus, Redfin, Zillow
2) Santa Ana's "livability score" of 51 indicates a significantly poor quality of life
Signal strength: moderate
The livability score of 51 in Santa Ana is a clear indicator that investing in property here might not be the best decision.
One reason for this low score is the high crime rate, which can deter potential buyers and renters, affecting property values. Additionally, the overcrowded schools in the area can be a concern for families, making the location less attractive for long-term residence.
Furthermore, the limited green spaces and recreational areas contribute to a lower quality of life, which can impact the desirability of the neighborhood. These factors combined suggest that the potential for property value appreciation is limited, making it a less appealing investment.
However, if the livability score were to improve significantly, it could indicate a more promising investment opportunity in the future.
Source: AreaVibes
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3) A local in Santa Ana would need about 9.5 years to afford a house, which is quite a long time
Signal strength: moderate
In Santa Ana, it would take around 9.5 years for a local to buy a house, which is quite high. This is a signal that buying property here might not be the best investment.
The median household income is about $85,914, which is relatively low compared to the cost of homes. Meanwhile, the median home price is around $816,950, making it difficult for locals to afford a home.
When it takes such a long time for locals to buy, it indicates a potential lack of demand from local buyers. This could mean that property values might not increase as much as in other areas.
If the time it took for locals to buy a house was significantly lower, say around 5 years, it might suggest a healthier market for investment.
Source: USCensus
4) Santa Ana, California is experiencing a drop in its population
Signal strength: moderate
The population of Santa Ana, California, has been on a decline, which can be a significant factor when considering property investment. A decreasing population often indicates a reduced demand for housing, as fewer people are looking to buy or rent homes in the area.
From 2000 to 2023, Santa Ana's population decreased by 27,678, with a notable decline since its peak in 2009. This trend suggests that the city might be experiencing economic or social challenges that make it less attractive to potential residents. Between 2021 and 2023, the population further decreased by 627, reinforcing the pattern of decline.
When the population decreases, it can lead to a surplus of available properties, which often results in lower property values. This can make it difficult for property investors to achieve a good return on investment, as the potential for property appreciation is limited.
Additionally, the long-term decline over the last decade, with a decrease of 21,252 people, highlights a persistent trend that may not reverse soon. While California's overall population is growing, Santa Ana's decline suggests that the city is not benefiting from the state's positive growth, potentially due to local issues that need addressing.
Sources: Neilsberg, California Demographics, California Government, US Census Bureau
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5) In Santa Ana, the "cash-on-cash return" is notably low at just 3.0%
Signal strength: moderate
The cash-on-cash return of 3.0% in Santa Ana is considered low, indicating that the income generated from the property is not substantial compared to the initial investment. This low return suggests that the property might not be generating enough rental income to cover expenses and provide a satisfactory profit.
In Santa Ana, the rental market is often driven by long-term tenants who are typically families looking for stability and proximity to schools and workplaces. These tenants usually prefer renting over buying due to high property prices and the cost of living in the area, which can limit the potential for rental price increases.
As a result, the rental income potential is somewhat capped, making it challenging to achieve higher returns on investment. This situation is compounded by the fact that property values in Santa Ana have not been appreciating at a rate that would offset the low cash-on-cash return.
For this signal to indicate a good investment, the cash-on-cash return would need to be significantly higher, ideally above 8%, to ensure that the property generates enough income to justify the investment.
Source: Mashvisor
So, is it worth buying property in Santa Ana? Not really.
Investing in property in Santa Ana doesn't seem like a wise choice right now.
The price-to-rent ratio is a staggering 41.9, which means buying a home is much more expensive than renting. This high ratio suggests that investors might not see a good return on their investment, making renting a more economical choice in the short term.
Additionally, Santa Ana's livability score is only 51, indicating a poor quality of life due to factors like high crime rates and overcrowded schools. These issues can deter potential buyers and renters, limiting the potential for property value appreciation.
Moreover, it takes about 9.5 years for a local to afford a house, which is quite long. This indicates a potential lack of demand from local buyers, suggesting that property values might not increase significantly.
The city's declining population further complicates the situation, as it can lead to a surplus of available properties and lower property values. Lastly, the cash-on-cash return is a low 3.0%, meaning the income generated from property is not substantial compared to the initial investment.