The housing market across California has had large price gains over the past years, with statewide median prices attaining November 2007 highs. Consumers often contemplating whether it is more beneficial to buy a property now or continue renting. To assist with this decision, C.A.R. has looked at the costs and benefits of renting versus owning property in California and eight of its local regions over a seven year time horizon.
The costs of buying include the monthly mortgage payment, insurance and taxes, and improvements and repairs. These costs were offset by the benefits of buying: mortgage interest and property tax deductions, and investment appreciation. The costs of renting include the monthly rent payment and renter insurance, which were offset by the benefits of renting: the appreciation on investing the down payment in the stock market.
For the State of California, consumers can save 96.5 percent per month by buying a property. At the local level, buying in Los Angeles County will save you 96.4 percent per month.
In several counties, given price and rent appreciation, buying will net the individual income over the seven year time frame.
These results are given with the caveat that the buyer must have on hand the standard 20 percent downpayment, and are driven by the large increases in both rental prices and home prices across the state. Again, over the 7 year horizon buying make sense financially in Los Angeles county and other counties reference in the chart above.
Along with incorporating price levels, the analysis includes tax deduction benefits as many of the costs associated with homeownership general upkeep, inflation, insurance, mortgage rates; as well as the opportunity cost of not investing in the market, and general price levels. On the rental side, it annualizes average rent and rent increases for the county (eg. it would understate the benefit of renting a rent stabilized unit) and includes rental insurance, and security deposits.
If you would like a customized analysis on Rent versus Buying base on your personal financial information, please contact us anytime at 213-995-5057.