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Many Americans dream of one day moving to California — preferably to start their life of celebrity and superstardom, but perhaps just to enjoy the sunny weather and beautiful landscapes. But soaring property prices and unstable mortgage interest rates have made it even trickier than usual to afford housing in the Golden State. Buying a house in California can be an expensive proposition, simply out of reach for many people — so is renting a better option? We’ll dig into exactly why the California real estate market is the way it is, and talk about some of the pros and cons of renting vs. buying a home.
The State of California’s Housing Market
California is famous for many things: Hollywood, Disneyland, wine country, and gorgeous beaches. But it’s also famous for sky-high property prices. California is the most expensive state in the US to buy a home, hands down, with the median home price settling at around half a million dollars.
This isn’t entirely endemic to California, either; in many states throughout the US, people are finding it difficult to afford housing.
It’s gotten bad enough that even native Californians are asking themselves if it’s worth it to try to buy a home there. According to the California Association of Realtors, only 18% of Californians can afford a median-sized home. That’s less than one in five people. With such high barriers to affordable home ownership in California, it’s no wonder so many residents (and prospective residents) are thinking of renting instead.
Understanding Rental Prices in California
But is it cheaper to rent than to buy in California? The short answer is: it depends. Rental prices can vary significantly from one place to another. Even various locales in the same city can cost far more, or less, than others.
Take, for example, San Jose. The median rent there is $3,181, while the median mortgage payment is $9,372. In Lost Angeles, the difference between rent and mortgage payments is around $2,800; in San Francisco, it’s around $4,000. In short, while renting in California is not cheap to rent, renting is generally a great deal cheaper than paying a mortgage.
Home Loan Assistance in California
For people wanting to buy a home in California, especially first-time buyers, it can seem like an impossible task. But there are some resources available for people who need help with getting their name on the deed — namely, some loan assistance programs.
The California Housing Finance Agency (CalHFA) offers programs such as affordable homeownership education programs and loans for qualifying homebuyers. Some of these loans require a 20% down payment — a hefty requirement, given real estate property prices in the Golden State — but others, such as FHA loans and VA loans, are more generous. Still, to buy in someplace like Los Angeles, you can expect to need a down payment of anywhere from $36,000 to $240,000.
Buy or Rent?
With California’s sky-high home prices in mind, let’s make the case for renting rather than buying:
Flexibility. Renting a home is much easier than buying when it comes to paperwork, moving, and flexibility. A house is a major commitment — an apartment, not so much. This is especially useful for digital nomads or people who don’t otherwise plan to stay for long.
Affordability. We’ve already established that rent in California is almost universally cheaper than making a mortgage payment. But there are other expenses to keep in mind, as well. If you rent, you don’t pay property taxes, HOA fees, or other associated costs. There’s also the matter of insurance. Homeowners insurance can be relatively expensive, especially in a state like California, where wildfires and other natural disasters are common. Things have gotten dire for the insurance industry nationwide, with expensive payouts more common than ever and premiums skyrocketing as a result.
But renters insurance provides just as much protection for your belongings, as well as liability coverage. Best of all, it’s highly affordable — according to Kristine Lee at The Zebra, the average renters insurance premium in California is $223…. yearly. Even though it’s higher than much of the rest of the US, it’s still highly affordable.
Maintenance. One of the biggest perks of renting (if you have a decent landlord, that is) is not having to do home maintenance or repairs yourself. Property owners and managers are responsible for the upkeep of your unit, and as long as they are responsible, this can be a load off your shoulders.
Buying a home is rarely easy, and in such a high-demand state as California, it’s a lot more difficult than most other places. The challenging real estate market there has made renting a much more attractive prospect than buying for many residents — renting allows for many of the benefits of having a home without quite as many expenses and responsibilities.
The news and editorial staff of the Times-Standard had no role in this post’s preparation. This is a paid advertisem*nt and does not necessarily reflect the official policy or position of the Times-Standard, its employees, or subsidiaries.
