In The Buyers Corner: Should I Rent Or Buy?

One of the thorniest issues for a potential home buyer to answer is “When should I stop renting and buy a house?” Much of that answer is driven by lifestyle, and life stage. Marriage, children, and the search for school districts are some of the big motivators for home purchasing.

Sometimes though it is also a question of allocation of financial resources. And in some cases, in some markets, in some times, it may make more sense to rent than buy because it is cheaper. That is rarely the case in Marin County, as the restricted supply of homes here means long term, appreciation in home values will almost always trump a temporarily lower cost to rent.

A great resource to show this is the New York Times Rent vs. Buy calculator. It allows you to input 21 different variables, from the price of the home to the cost of home insurance, on a very easy to use interface, and constantly updates the “magic number”, or the price at which it makes sense to rent. We ran a couple of different scenarios, and the answer was always “buy”. For example, we input the numbers of a home we recently valued for a client at $1,650,000; the number it was better to rent at was $5,432 per month. The home was rented two weeks ago at $7000 per month.

It has been that way for the last several years, although there are signs that the rental market is softening in Marin County.  But constant appreciation in value, which has been the norm for the last 60 years in almost every single year, means that buying usually makes more sense.

So as difficult as it may be, if you want to live in Marin, it still makes sense to buy instead of rent, if you can afford it.


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