Homeownership Now Far More Expensive Than Renting Across CA, New Report Finds

For Californians weighing whether to rent or buy, a new report suggests renting is now a far more affordable option in much of the state.

Rental marketplace Zumper analyzed housing costs in more than 80 U.S. markets and found California dominates the list of metros where buying a home costs substantially more each month than renting. The report compared median rents with the monthly cost of owning a median-priced home, including mortgage payments, property taxes and homeowners insurance.

“California home prices are among the highest in the country and while rents are high too, they haven’t climbed proportionally to prices," Crystal Chen, Zumper spokesperson, told SFGATE via email. "When prices run that far ahead of rents, the ratio blows out, and renting becomes the more rational near-term choice.”

The findings add to growing evidence that homeownership has become increasingly difficult to achieve in California. A 2023 report from UC Berkeley's Terner Center for Housing Innovation found fewer Californians are becoming homeowners, and those who do are buying later in life as rising home prices push ownership further out of reach.

According to the report, California's homeownership rate has fallen to 43.5 percent among adults ages 25 to 75 — the second lowest in the nation, behind only the District of Columbia. The study also found the typical age at which a majority of Californians become homeowners is now 49, compared with about 35 in most other states. Researchers concluded that soaring housing costs, more than demographic shifts, have been the primary driver of the state's declining homeownership rate.

San Jose topped the national rankings by the widest margin.

The report found the median home price in San Jose has climbed to $2.03 million, while the median monthly rent is $3,073. That means buying costs an estimated $11,666 per month — about $8,593 more than renting. The city also posted the nation's highest price-to-rent ratio at 55, more than double the level generally considered to favor renting.

The Anaheim metro area of Orange County ranked second nationwide. There, the median home price is nearly $1.44 million, while the median monthly rent is $2,514. Homeowners pay about $8,216 per month, or roughly $5,702 more than renters.

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California claimed five of the nation's top nine cities where renting offers the strongest financial advantage.

In San Diego, buying the median-priced home costs about $6,026 per month compared with a median rent of $2,818, a difference of roughly $3,208 each month. San Francisco homeowners pay about $7,758 monthly versus a median rent of $3,926, while Los Angeles buyers pay about $4,995 compared with $2,670 for renters.

The report also found renting remains cheaper in several other California markets, though by smaller margins:

• Sacramento: Buying costs about $1,450 more per month than renting.
• Fresno: Buying costs about $989 more per month.
• Bakersfield: Buying costs about $808 more per month.

Researchers said there is no one-size-fits-all answer to the rent-versus-buy question because housing markets vary widely. Traditionally, a price-to-rent ratio above 21 indicates renting is the stronger financial choice, while a ratio below 15 favors buying. California's largest housing markets all exceeded that threshold by a wide margin.

The Terner Center estimated that nearly half of California's decline in homeownership since 2000 could have been avoided if home prices had increased at rates similar to the rest of the country. The researchers said boosting the supply of homes — particularly smaller, more affordable "missing middle" housing — is key to making homeownership more attainable.

To produce the rankings, Zumper combined its rental data with National Association of Realtors median home prices. Monthly ownership costs assumed a 20 percent down payment on a 30-year fixed mortgage at a 6.49 percent interest rate and included estimated property taxes and homeowners insurance.