Renting vs buying a condo in the Bay Area: the monthly math

The monthly cash cost, city by city

For each city, the typical two-bedroom condo for sale today (the median asking price and median HOA of the two-bedroom condos Stealpad tracks; income-restricted, co-op and live/work units left out) against the typical two-bedroom rental listed today:

Assumptions: 20% down; a 30-year fixed at 7.32% (Freddie Mac’s weekly national average); property tax at 1.2% of the price a year; $100 a month of insurance; the city’s median HOA for a two-bedroom. Those are cash costs only. Run your own numbers with the true monthly cost calculator, which uses the HOA fees actually recorded in each city.

What the monthly number leaves out

The monthly comparison is the honest starting point, and it is not the whole answer. Owning brings things a rent payment never does — and costs a rent payment never has:

• Equity. Part of each mortgage payment repays the loan. At 7.32%, only about 12% of the first year’s payments does; the share grows every year.
• Appreciation — or not. Condo prices can rise or fall; nobody can promise either, and this comparison assumes neither.
• Predictable housing cost. A fixed-rate payment does not rise with the market, and California’s Proposition 13 limits increases in a home’s assessed value to 2% a year while you own it. Rents can rise much faster: Zillow’s index for San Francisco is +26.4% over the past year.
• HOA increases. The HOA is the part of a condo’s cost that does rise — a median 6% a year across the buildings Stealpad tracks (HOA Fee Report) — and a special assessment can add thousands at once (how to see one coming).
• Buying and selling costs. Closing costs, transfer taxes and agent commissions add up to several percent of the price, so a short stay rarely earns them back.
• The down payment’s other uses. Money tied up in a home is money not earning interest elsewhere.
• Maintenance and taxes. Repairs inside the unit are yours; the mortgage-interest deduction helps only if you itemize, which most households no longer do.

Price-to-rent: one number to read the market

Divide a home’s price by a year of rent for a comparable home and you get the price-to-rent ratio. The lower it is, the more buying pays off relative to renting; a widely used rule of thumb reads 15 or under as favoring buying, 16–20 as leaning toward renting, and over 20 as strongly favoring renting. The cities here run from 15.7× (Hayward) to 20.6× (San Leandro).

When buying a condo can still make sense

• You expect to stay five to seven years or more, long enough for equity to build and the buying and selling costs to spread out.
• You found a condo priced below the market rather than at it — the Steal Index ranks the ones furthest below recent sold prices.
• The building’s HOA is healthy: a funded reserve, no pending assessment, dues rising at a sane pace. The reserve study guide shows how to check.
• Rents where you want to live are rising fast, and a fixed payment would protect you from that.

When renting is the better call

• Your plans for the next few years are uncertain — a job, a relationship, a move.
• The monthly gap above is large for your budget, and the down payment would leave you without a cushion.
• You would be buying into a building with a thin reserve or a special assessment on the way.
• You can find a fairly priced rental — the rentals board scores every Bay Area listing against market rent, and the rent checker tests any rent you are quoted.