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Buying a Home in the Bay Area Is Still More Affordable Than Renting
Even with a sustained rise in home prices over the past year, buying a home is significantly cheaper than renting one in the Bay Area.
On average, buying is 13 percent cheaper than renting a comparable home in the San Francisco metropolitan area, according to the latest Rent Vs. Buy Report from real estate listings syndicator Trulia. In the Oakland metro area, the savings total 24 percent. (The San Francisco metro area includes Marin, San Francisco and San Mateo counties; the Oakland metro area includes Alameda and Contra Costa counties.) Rising home prices and mortgage rates have narrowed the gap between buying and renting over the past year, but sky-high rental prices still give the edge to homebuyers. A year ago, buying was 19 percent cheaper in San Francisco and 40 percent cheaper in Oakland. Nationwide, buying a home is 38 percent cheaper than renting, according to the survey of 100 U.S. cities, conducted in December and January. Trulia based its calculations on obtaining a 30-year, fixed-rate mortgage with a 4.5 percent interest rate; itemizing deductions at the 25 percent federal tax bracket; and staying in the home at least seven years. Will renting become cheaper than buying soon? According to Trulia’s methodology, buying will edge renting by only 2 percent in San Francisco and 15 percent in Oakland when mortgage rates reach 5.5 percent. Currently, 30-year, fixed-rate mortgages average 4.37 percent, according to Freddie Mac. Of course, comparing mortgage rates and rents is just one part of a potential homebuyer’s decision. Several months ago, a survey by the California Association of Realtors found that nearly 75 percent of renters rated homeownership “important.” Among renters who said they hope to own a home, 44 percent said they were renting only out of financial necessity. Renters mentioned a lack of building equity, the inability to make changes to their living environments, and unpredictable rate increases as the top three things they dislike about renting. Click here to read more (Image: Flickr/Instituto Inovacao)