Cheaper to rent than to buy condo in L.A.
Despite the steep drop in housing prices, it still makes sense for many Angelenos to rent rather than buy, according to an analysis by real estate website Trulia.
Trulia calculated a ratio that compared the median list price of two-bedroom condos with the median rental cost of similarly sized apartments.
It’s cheaper to buy in cities with ratios of 15 to 1 or less, and cheaper to rent in cities with ratios of 21 to 1 or more, according to Trulia. It’s generally cheaper to rent in cities with 16-1 to 20-1 ratios, although in some situations it could make financial sense to buy. In Los Angeles, the ratio was 19 to 1.
It’s cheaper to buy than rent in Sacramento (ratio: 8 to 1), Long Beach (12 to 1) and San Diego (15 to 1), according to Trulia.
Across the rest of the nation, it’s cheaper to buy in about three-quarters of U.S. cities.
According to Trulia, the median monthly rent is $2,100 in Los Angeles. That compares with the median monthly condo cost (including property tax and home insurance) of $2,438.
Potential buyers should consider several factors before jumping in, according to Trulia.
First, make sure your job is secure and your income is steady. Next, make sure you’ll stay in the home seven to 10 years (in case the price falls after you’ve bought).
Finally, have eight to 12 months of mortgage payments in an emergency fund -– to make sure you can keep paying the mortgage in case your job isn’t as secure as you think it is.
-- Walter Hamilton
Photo: Los Angeles Times file