Tenants are often nudged to buy a home with the notion that owning has relatively fixed costs, while rents are ever-rising.
Read more Suspected DUI driver arrested in fatal hit-and-run in Garden Grove
Well, California’s ownership costs are so out of whack that the homebuying adage may no longer matter.
Look at what my trusty spreadsheet found in Zillow data on rents and home prices for 50 larger U.S. metropolitan areas, including six in California: It would take almost two decades for Golden State rents to reach the monthly financial pain that a homebuyer faces today..Contemplate the cost gap. The median rent of the six California metros was $2,929 monthly in September. Meanwhile, homebuyers in those markets had an estimated $6,770 monthly house payment on a $930,000 purchase.
That’s $3,839 in monthly savings for California’s tenants. How wide is that gap?
Let’s assume that rents in those six California metros grow at a 5.1% annual pace, the average gain over the last 11 years. It will take roughly 17 years for rising rent to match what a homebuyer paid in September 2026.
Yes, tenant savings wouldn’t disappear until 2043.
Among the California metros, San Jose had the nation’s longest time for rents to equal purchasing costs: 36 years, followed by San Francisco, 27 years; Los Angeles-Orange County, 20 years; San Diego, 16 years; Sacramento, 12 years; and the Inland Empire, 9 years.
The national low was Pittsburgh at three years.
By the way, that estimated payment was calculated using Zillow’s median house value, financed with a 30-year fixed mortgage at 6.9% from Freddie Mac in September. That rate was boosted by 2.2 percentage points to account for often-ignored costs: property taxes and insurance – plus a rate premium for assuming only a 10% down payment.
Now homebuying fans will argue that an owner might refinance to lower their costs over time. And what about tax deductions? Or future home price appreciation?
Of course, owners also face other recurring costs, from association fees to maintenance expenses. And don’t forget the down payment needed to make this theoretical purchase work. That’s $93,000 in the September 2026 example.
Statistical debate aside, this math highlights a big challenge for California’s home sales: buying demands a tenant make an incredible long-term bet even as renting offers huge housing savings.
With California’s homebuying pace near Great Recession lows, it seems that numerous tenants are rejecting the buy-now bait.
Nationally speaking
This cost gap is not just a California thing.
There’s a $739 difference between September’s $1,932 U.S. median rent and the $2,670 estimated house payment on a $366,900 purchase.
Assuming rents will grow nationwide at their 4.6% average rate since 2015, it would take an American renter seven years for their check to the landlord to equal a homebuyer’s cost in September 2026.
And the U.S. extremes? In San Jose it would take 36 years, while it’s just three years in Pittsburgh.
How’d we get here?
California tenants, your rent hikes look modest compared with what house hunters are paying.
Read more San Clemente’s Griffin Colapinto wins big in Portuguese surf contest
Yes, the median rent in the six California metros jumped 42% since 2019, before the pandemic upended real estate.
Yet in the same seven years, a buyer’s estimated monthly payment jumped 113%. It did not help that 30-year mortgage rates were at 6.9% in September, up from 3.6% seven years ago.
So, tenants enjoyed 38% smaller cost hikes.
And while it may sound odd, this pricing advantage allows landlords to retain many of their renters as the housing marketplace struggles to find buyers.
Among the California metros, the Inland Empire rent hikes were 47% smaller than payment jumps for buyers, No. 6 among the 50 U.S. metros, followed by Sacramento, 45% smaller; San Diego, 39% smaller; San Francisco, 36% smaller; Los Angeles-Orange County, 31% smaller; and San Jose, 27% smaller.
America’s tenants saw a similar pattern, too: U.S. rent hikes were 38% smaller than the cost surge in buying.
That’s comparing a 40% rent increase over seven years with a 104% jump in a buyer’s payment.
The U.S. extremes: 66% smaller rent hikes in New Orleans and a 21% gap in Austin, Texas.
“Tenant Talk” by Jonathan Lansner is a peek into the world of renting. Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
- Try Jonathan Lansner’s Substack collection of economic trends. CLICK HERE!
September’s most popular Southern California real estate stories …
No. 1: Taco Bell relocation its longtime Irvine headquarters
No. 2: Diane Keaton’s former Laguna Beach flip lists for $10 million
No. 3: What’s the best housing market in Southern California?
No. 4: Dolly Parton’s former Solvang cottage compound lists for $2 million
No. 5: Newport Coast home linked to Latin music star Peso Pluma seeks $14 million
No. 6: Ultra-luxe, ‘overengineered’ beachfront Dana Point estate seeks $65 million
No. 7: California wants more fines against Huntington Beach in housing lawsuit
No. 8: Laguna Cliffs Marriott Resort rebrands amid renovation
No. 9: Historic Dana Point home by Hollywoodland developer lists for $2.2 million
No. 10: Newport Beach waterfront estate with multi-boat dock lists for $58 million
Read more OC Republican Party pounces on mailer it calls ‘racially degrading’
No. 11: Costa Mesa approves plan to replace Fairview Center with 2,300 new homes