It is a common question for potential homebuyers to gauge whether buying a home or renting a place is financially the best decision. Figuring out whether it's better to buy or rent rests on three main factors: Where you live, how long you plan to stay and how home prices compare to rents in the area.
According to Zillow, buying a home is more affordable than renting in nearly two-thirds of metros. Simply put: in today’s housing market, homeownership is a better investment.
If you would like to know more about the financial benefits of homeownership versus renting, Hedy Goldman, an experienced North County San Diego realtor can help. Contact her office at if you want to understand the housing market.
5 factors to assess when comparing buying to renting
In order to truly assess whether buying or renting a North County San Diego property is the right move to make, a few factors must be considered. It’s important to look at location, how long you plan to live in the home, upfront payments, closing costs, insurance, utilities, maintenance, historic and anticipated home value appreciation rates, rental prices, and rental appreciation rates.
Zillow assessed all of these factors and determined that in 64% of U.S. metros, buying is more affordable than renting if homebuyers plan to stay in their homes for at least three years.
Here’s a closer look at some of the factors that determine whether you should buy or rent:
1. Location: No two housing markets are the same. You should check local housing data to identify the best areas to buy.
2. Longevity: Ideally you will want to stay in your home for three to five years, in order to see the return on your investment.
3. Maintenance: Typically, you’ll pay higher insurance and maintenance costs for a home. Additionally, these are out-of-pocket costs. Rule of thumb: Stash away 1% of your home’s value for annual maintenance costs.
4. Upfront Costs: Before buying a home, potential owners need to ensure they have at least 20% of the cost for a down payment. This is often referred to as the "magic number" for a house down payment and can come with lower interest rates compared to loans for people who can only afford 10%.
Upfront costs for renting an apartment typically include a down payment of at least one month's rent and a security deposit, which you can recoup at the end if no damage is done.
5. Return on Investment: Home prices are on the rise and housing inventory is the lowest in years, showing that real estate is in high demand. This is a step in the right direction if you become a homebuyer and desire to sell at the right time. You’ll get a return on your investment – something you will never see as a renter.
What makes homeownership more affordable
Currently, there is high home value appreciation in many areas. Then take into account that we are experiencing historically low mortgage rates and low home prices, makes home-buying a very advantageous financial decision compared to renting.
In some metro areas, it would only take homebuyers two years to reach the break-even point. On average it would take homeowners three years for buying to become more financially advantageous than renting. With data such as this, homeownership for many, can truly be the investment of a lifetime.
Hedy Goldman has lots of knowledgeable information to share. She has been practicing real estate since 1996 and is a 2010 gold award winner at Windermere Real Estate SoCal. Hedy sells all over San Diego, but specializes in North County Coastal. She can be reached at (858) 504-2334 or San Diego Realtor.