Homeownership is often treated as the destination in Southern California, but the numbers suggest Los Angeles-area renters may be making a better financial choice.
According to Realtor.com estimates highlighted by the Los Angeles Times, renting a small home in the Los Angeles-Long Beach-Anaheim metro leaves residents more than $2,000 a month better off than buying a similar property.
Here's what to know
In the Los Angeles area, the typical renter pays $2,787 for a small home with no more than two bedrooms, while owning a comparable property costs $4,836 a month, Realtor.com found.
The Los Angeles Times reported that the $2,049 difference is the largest rent-versus-buy spread among the nation's 50 biggest metro areas.
Nationally, the average gap between renting and buying is much smaller, at $858 per month. Even New York, another famously expensive housing market, was lower at $1,823.
The report covers Los Angeles and Orange counties, a region where housing expenses influence nearly every other household budget choice.
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In Los Angeles County alone, renters account for more than 60% of occupied households, according to the Los Angeles Times.
More background
This is not just a brief swing in the market.
The rent advantage has persisted, aided by 36 consecutive months of year-over-year rent declines nationwide, even as mortgage rates and home prices have remained high in many metro areas, the Los Angeles Times reported, citing Realtor.com data.
Ownership has also become harder to reach in Los Angeles for reasons that go beyond sticker price.
Condominium sales in Los Angeles County during January and February fell to their lowest level since 2005, as high interest rates and building costs deterred prospective buyers.
New supply remains another challenge. Developers have said expensive land and labor, along with regulations, taxes, and construction expenses, make projects in and around Los Angeles difficult to profit from, which limits how many homes reach the market.
Even as condo prices cool, many residents still keep renting. For many households, the choice is less about preference than about what their finances will realistically support.
What can be done?
For renters who still hope to buy eventually, the savings from renting can go toward a down payment, emergency savings, or debt repayment.
That does not mean every renter actually has an extra $2,000 each month to save, though. Los Angeles remains expensive across the board, and many residents rent because qualifying for a mortgage is simply unattainable.
As long as ownership costs remain this far above rents, renting may be less of a compromise and more a form of financial leverage.
"The monthly savings, like the $2,000 renters enjoy relative to buying [in L.A.], can be put directly towards the down payment, which could create a faster path to homeownership," Jiayi Xu, a senior economist at Realtor.com, said.
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