Whether to rent or to buy depends on a lot of factors, but for most people it comes down to price.
When the monthly rent payment is cheaper than what a monthly house payment would be, it usually makes more sense to rent.
On the other hand, if you can buy a home or condo and pay the same or less per month than what a rent payment would be, it usually makes more sense to buy.
Buying vs. renting in Los Angeles
In some markets, housing is extremely expensive whether you buy or rent and Los Angeles is one of those markets.
Though home prices have fallen significantly since the housing bust of the late 2000s, prices in Los Angeles continue to be some of the most expensive in the country.
In the first quarter of 2012, the median price of a home in the Los Angeles area was $281,400, which is nearly double the U.S. median price of $158,000, according to the National Association of Realtors.
That’s a lot of money, but thanks to today’s record low interest rates, it’s affordable.
With a 20 percent down payment and a 30-year mortgage, a home at this price would have a monthly payment in the $1,500 a month range, including taxes and insurance.
That may sound like a fair amount of money to pay out for housing every month, but it’s actually a bargain compared to what it costs to rent in LA.
According to an April 2012 Los Angeles Times article, the average rent in Los Angeles County in 2011 was $1,596 a month. That figure was up 6 percent from 2010 and is expected to keep growing, with increases of nearly 8 percent in 2012 and 9.6 percent in 2013 predicted.
Strictly based on monthly payments, it seems that it’s cheaper to buy currently than to rent in Los Angeles. However, for most people, there are other issues to consider.
For example, If you don’t have a significant down payment saved up and don’t have the ability to save up the money in a reasonable amount of time, a mortgage payment will be much more expensive on a monthly basis.
Also, you need to think about how long you intend to live in your home. If you think you might have to move within a few years, you may want to stick with renting.
While the housing market is showing signs of improvement, it is slow and it may be years before homeowners see any significant appreciation again.
If you need to sell a home within the next few years, it could be difficult and you could wind up losing money.
On the other hand, if you plan to stay in your home for many years, now is a great time to buy. Interest rates are at an historical low and prices in Los Angeles have fallen $192,000 since the start of 2005.
If you are considering buying, do some research on mortgage rates and rates on homeowners insurance. Sources of financial information are available online at Moneysupermarket.com.
Article written by MoneySupermarket. Click here to see great deals on buy-to-let mortgages