It's True, Renting Can Make More Sense than Buying in the San Francisco Area
While it may sound like an absurdity, the facts bear out the truth that renting can make more sense than buying during a housing market downturn. This is true not only in the San Francisco Area but in many areas across the United States. Let's take the nearby community of Pleasanton as an example. The financial reasons for renting Pleasanton apartments instead of buying are stronger than they have ever been.
Currently there are families paying from 40-50% of their income in mortgage and taxes. Add to that the cost of homeowner's insurance and basic upkeep and suddenly renting sounds like a great idea. Renting is normally a lower monthly fee than buying, there are no maintenance fees to worry with and taxes aren't a concern.
Out of Kilter
The current economic state and the housing market have caused this oddity in home options. During the real-estate boom, renters were moving to the housing market in droves. Now, with the value of homes on the decrease, those mortgage payments and associated costs are seemingly for naught.
This off-kilter situation has homeowner's rethinking their mortgages and their living arrangements, especially in large cities where the price of owning a home had skyrocketed. Homeowners who manage to pay their monthly mortgages are realizing that their investment income has dropped dramatically or even ceased to exist.
In order for this unbalanced see-saw to regain some stability, rents would have to go up dramatically on apartments. Take for example the median mortgage payment of $1687 month and compare it to the $868 median rent payment. This gap doesn't include insurance, taxes or maintenance and so the gap widens. It widens even further in large cities such as San Francisco where home prices had went through the roof during the boom.
Based on those numbers a family earning the median income of approximately $47 thousand dollars would be spending 51% of it on their mortgage. It's hard to imagine spending that percentage to live in a home when the suggested percentage that should go to the mortgage or rent is 25 to 30. Renting would be at the 25% level, a figure that would make living a normal life easier.
Invest or Lose
At the current rate of renting versus a mortgage, renting allows for extra income to be put towards investing and saving, which make money and secure the future. On the other hand, paying an outrageous mortgage for a home that is still receding in value is basically ludicrous. Currently, the dream of home ownership doesn't really make good financial sense in some cases.
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