Yes and No. What do we mean by that? Well it depends on a lot of factors that we explain below
Common wisdom is that renting is a waste of money. However, we want to point out a few real benefits to renting: 1) Short term nature of most leases reduces a lot of complications in your life especially when changing jobs or moving cities; 2) It provides a lower and predictable cost of living (no property taxes, repairs, or maintenance); and 3) It does not require a downpayment to secure a lease which can be exorbitant when buying a house in certain cities.
You can do as much analysis as you want but we believe one of the biggest factors in the own vs rent debate is how long you expect to live in a particular neighborhood or location. If you plan to move every year or two, transaction costs associated with buying and selling a house will eat up any benefit of owning and potentially make it even more expensive.
For example, in high cost of living areas like Los Angeles, San Diego, San Francisco and San Jose, the total dollar and percentage difference between the cost of renting and cost of owning are especially high. It may not be feasible to own a home, especially where starter homes run $600,000 or more. Just a 20% down payment is $120,000.
It’s a complicated question that gets into how much you can afford, what neighborhood you want, or need, to live in, whether you have kids and where they go to school, etc, etc.
If you plan to stay in one place for 5 years or more and can afford the down payment, it probably makes sense to own. As you make mortgage payments you will build equity and gain some tax advantages which we discuss in our tax advantage article.
We are not here to convince you either way, we’re just here to help you make an informed decision. Check out our affordability calculator to understand what levels of rent are considered affordable or unaffordable for a given income.