Recently, the San Jose Mercury News published an intriguing article comparing the costs of renting a home versus buying one. Basically, the results were as follows: in the Bay Area’s current market, we find ourselves in the interesting position of renting ostensibly being cheaper than buying. As anyone living in the area knows, neither option is exactly what one would consider cheap, but this study prompts the question…
If you’re considering buying a home, are you better off renting instead?
Though at a surface level the article would suggest that the answer to this question is “yes,” a closer examination reveals that things are not so simple. For one thing, the study only takes into account raw numbers on a pretty large scale. Individual cities and neighborhoods can vary pretty wildly in housing costs, and what is true for one area may not be applicable to another just a few miles up the road. A detailed analysis of each specific area one may be considering a move into is necessary to truly weigh the relative costs.
In addition, there’s the issue of immediacy versus long-term security. Sure, right now renting may make the most sense economically, but it’s a constantly shifting balance that may be quite different in the future. Meanwhile, mortgage rates are still at a relative low, though they are showing signs of trending upwards. Locking in a mortgage rate now will allow you to plan out the next several decades of housing costs, while still taking advantage of low rates, whereas renting poses a much greater risk…you may be able to assume your rent for the next few months or years, but what about years from now? The security of having a guaranteed mortgage rate can offset short-term savings.
That’s not even to mention the massive benefits of homeownership in the first place (you’re never going to have equity in a rental), nor the relative quality of rental dwellings versus homes listed for sale, or the security of living within a certain school district for those with children. It’s a complex issue, and not so cut and dry as one might think. Still, the study is a very valuable one, and presents some interesting data for anyone looking to weigh their housing options.
In the end, there is really no one-size-fits-all answer to the question of renting versus buying. Each individual must take stock of their own situation and goals in order to decide which is truly the best option for them. Fortunately, my team and I are always here to provide advice for any prospective home buyers weighing their options, so don’t be afraid to consult with me to decide what is truly the best course of action for you!