In Los Angeles, as steep as rents may be, ownership is even harder on the budget.
Zillow reported that the estimated monthly cost of buying in the area exceeds renting by $4,544 — a gap that appears to be pushing more residents toward leases.
Here's what to know
Across Southern California, mortgage-related expenses are climbing faster than rents, sending added demand into a rental market that was already costly.
According to Zillow, as cited by The Korea Daily, rental demand in the Los Angeles metro area climbed 25.9%, outpacing the national increase of 19.2%.
Average monthly rent in L.A. rose 1.8% to $2,929, while Zillow's estimate for a new buyer's monthly payment increased 5.3% to $7,473.
Based on a 10% down payment and a 30-year fixed-rate mortgage, Zillow's formula showed ownership costs rising at nearly three times the pace of rent.
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Renting still takes a major bite out of incomes in Los Angeles. A median-income household signing a new lease would need to spend 33.7% of its income on rent — the third-highest share among major metro areas in the country.
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More background
Riverside also saw a sharp increase in rental demand, going up 26.9%. Average rent rose 2.9% to $2,533, while Zillow's estimate for a new buyer's monthly cost climbed 4.5% to $4,689, making ownership $2,156 more expensive than renting.
San Diego saw the strongest rental-demand increase of the three Southern California metros at 29.1%. Average rent there rose 2.2% to $2,967, while buying costs for a new purchaser reached $7,308 after a 4.8% increase, creating a $4,341 gap between the two.
Zillow defined spending more than 30% of income on housing as a cost burden. Riverside's rent-to-income ratio reached 31.0% — the fourth-highest among major U.S. metros — while San Diego ranked fifth nationwide at 30.1%.
What can be done?
Rather than take on a costly mortgage, many aspiring buyers are channeling the gap between a rent payment and a would-be home payment into savings or investments.
In L.A., that monthly gap of $4,544 can give households more room to build cash reserves while waiting for home prices or borrowing costs to come down.
That is also why cutting other recurring household bills can make a meaningful difference. With Palmetto's help, the average Southern California resident can save 40% on their electric bills, which can add up to thousands of dollars per year.
In a region where both rent and homeownership costs are straining budgets, Palmetto's $0-down offer could give households another way to create breathing room each month.
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