Homebuyers may be getting mixed signals about whether or not buying is more affordable in the long run. For example, in April, CNBC declared that “it's cheaper to rent on a month-to-month basis,” but this week the site ran the following headline: “It’s cheaper to buy a home than rent.”
Although both statements were arguably correct in context, the point is that even conventional wisdom can be highly situational.
The real estate site Trulia did its best this week to part the mess with its quarterly rent versus purchase report. The verdict: “The economic benefit has narrowed to the point that in some places, for some households, the decision to rent or buy a home may be too close to call,” says Trulia economist Cheryl Young.
In the Bay Area, where spiking rents and soaring housing prices play a never-ending game of chicken that we all lose, that gap is as narrow as it comes. It’s cheaper to buy than rent in San Francisco as Young calculates it, but the difference is only a meager eight percent.
That’s the second worst savings ratio of all 100 metro areas Young breaks down. The absolute worse? San Jose, where buying saves homeowners only 3.5 percent over the cost of renting.
Young arrived at her numbers by assessing “median home value and rent in April 2017” and then considering “the initial total monthly costs of owning and renting, including mortgage payments, maintenance, insurance, and taxes” plus “expected price and rent appreciation, as well as projected inflation.”
Do note, however, that sites like Trulia use algorithms to project home values. Like any automated process, the results vary.
Although in past reports Trulia generally ended up low balling San Francisco prices, which would actually exacerbate the problem highlighted in Young’s report.
For those who take this news as another sign that the Bay Area needs to build more homes, the site RENTCafe did at least single out San Jose as one of the nation’s most prolific builders this week.
In a report of their own, RENTCafe ranked North San Jose third in the nation for neighborhoods that added the most apartment stock since 2010.
This doesn’t necessarily reflect on building trends across the larger metro area, but still, nobody’s going to turn their noses up at 6,814 new units in one relatively small area.