According to the LA Times, a lot of would-be home buyers are wondering if they should buy or rent in the Los Angeles area. They’re weighing the new higher prices against interest rates still near record lows, deciding between the flexibility of renting and the potential long-term payoff of homeownership. And many are looking at a job market that still feels a little wobbly and wondering whether now is the right time to take the plunge.
In a follow up to Lack of Affordable Housing in Ventura County, Trulia has a piece about renting vs. buying and it shows that if you rent at $1,500 per month, in ten years that rent will have cost you $232,932. That’s enough money to buy a house.
Why would you rent instead of buying?
- Flexibility – if you don’t know how long you will stay in a particular area, renting works well
- Career stability – many young people seem to change jobs frequently, renting works well
- Credit – is either poor or not well established. The good news here for renters is that on time rental payments can establish credit.
- Income instability – It is hard to make a long term commitment on a house when you have worries about a stable income.
- No maintenance expenses – when something breaks, just call the landlord. Maintenance can add significantly to the cost of home ownership.
- No down payment – while zero down payments are available, banks like to have the homeowner put some skin in the game. 10% to 25% was the usual down payment.
- You may be able to rent an apartment with all the amenities you desire like a pool, gym, social meeting area, and conference facilities.
- The chief economist at Trulia, Jed Kolko regularly produces a Rent. Vs. Buy Index for 100 markets across the U.S., including L.A. He notes that home prices have been climbing faster than rents, “The gap