Los Angeles has experienced some of the sharpest rent declines in the country since the pandemic began around this time last year.
With few newcomers moving into the city, and others leaving in search of more affordable rentals, the median price of a one-bedroom apartment fell 15.6 percent year-over-year in February to $1,900 per month.
Los Angeles home prices, on the other hand, have skyrocketed due to record-low mortgage rates and dwindling inventory. January housing data from Realtor.com suggests that the median listing price in the Los Angeles-Long Beach-Anaheim metro area surged 22.4 percent annually to $1,150,000.
In an effort to compare the costs of renting versus owning, Realtor.com recently conducted an analysis of the country’s 50 largest metros. Each market’s median-priced home was pitted against a two- to four-bedroom apartment “so as to be somewhat comparable to the typical home purchase.”
In the LA area, renting an apartment is 34.7 percent more affordable than buying a typical single-family home. With a median listing price of $1.15 million, and assuming a 20 percent downpayment, a homeowner could expect a monthly mortgage payment of $4,875. Purchasing such a home would require 73 percent of the metro’s median household income — well above the 30 percent rule of thumb for budgeting housing costs.
Leasing a similarly-sized apartment in Los Angeles would set a renter back $3,433 per month, amounting to 52 percent of the median household income. The analysis notes that urban flight caused by the proliferation of remote work has “widened the gap between renting and buying,” particularly in West Coast tech hubs like San Jose, Sacramento, Seattle and Los Angeles.
The nearby Riverside-San Bernardino-Ontario metro area has emerged as a market where it’s 13 percent cheaper to buy than to rent. The median-priced home on the market, valued at $485,000, would come with a monthly mortgage payment of $2,224. Affording the typical home would then require 37 percent of the metro’s median income, offering some wiggle room for unexpected repairs or family vacations.
Renting an apartment in the same area would cost $2,536 per month, representing 43 percent of the median household income in Greater San Bernardino. Home and rental prices are on the rise in the Inland Empire, spurred by changing lifestyle needs and families seeking more space.
In January, the median listing price of a single-family home in the Riverside-San Bernardino-Ontario metro area jumped 17.9 percent over the same period one year ago. Demand has remained extremely high as the active listing count plummeted by more than 60 percent last month. A recent report by apartment rental platform Zumper also found that one-bedroom apartment prices in the Inland Empire spiked nine percent monthly and 20 percent annually in February.
Realtor.com Chief Economist Danielle Hale points out that there isn’t a “one-size-fits-all answer to the question of whether it makes more sense to buy than rent,” but says it’s encouraging news that 15 of the country’s 50 largest metros offer more affordable homeownership prospects.
“With interest rates expected to rise over the coming months, buyers may need to act sooner rather than later to take advantage of today’s affordability or be prepared to adjust their target purchase price,” Hale added.
