Should you buy a home or rent? Consider these factors

For many people, the American Dream involves owning a home. Instead of paying thousands in rent each month and dealing with the instability of lease renewals, you build equity and can eventually sell at a profit. At least, that’s the theory.

Experts say the decision to buy or rent has changed a lot in recent years, especially in California where high home prices, wildfires, and insurance issues have created a perfect storm.

“Buying a home in Southern California right now is a financial trap for most people,” says real estate mogul and author Grant Cardone. “Homeownership comes with major risks, and in California, those risks are growing by the day.”

Cardone argues that owning a home is not necessarily an investment but rather a liability when you consider property taxes, costly repairs, insurance premiums, and the risk of having your home destroyed or damaged in a natural disaster.

“Appreciation is not guaranteed, but high expenses are,” Cardone says.

The average 30-year fixed-rate mortgage has hovered around 7% for the past two years, the highest in over 20 years, according to Freddie Mac. The hope that mortgage rates would fall when the Federal Reserve began cutting interest rates last year has largely faded. Now, rate cuts are on hold.

For would-be homebuyers, this means the cost of borrowing money is the highest it has been in a generation.

Unfortunately, renting is also expensive as supply has not kept up with demand. According to Zillow, the average rent in California was $2,763 per month as of Feb. 3 for all sizes of apartments.

“This is simply a tough time to secure housing in Southern California,” says KTLA consumer reporter David Lazarus. “Home prices and mortgage rates remain high, and inventory remains limited. Rents, meanwhile, have been rising since the fires, despite efforts to keep them in check.”

The calculation for renting vs. buying a home always includes the potential for appreciation. After all, everyone wants to believe their biggest investment will pay off, allowing them to upgrade or retire comfortably.

However, as Cardone pointed out, that is not assured.

According to the state realtor’s association, the median single-family home price in California was $861,000 in December 2024, nearly double what it was a decade ago but $30,000 below May 2022. Appreciation has been impressive over the decades, but not necessarily in a straight line.  

KTLA reached out to several financial experts for this report, and all shared a similar opinion: owning a home is a good decision only if you plan to live there for many years. Otherwise, hold onto that down payment and put it to work elsewhere.

“While buying can be a solid investment, renting often makes more sense for those who want affordability, mobility, and freedom from the costs and responsibilities of homeownership,” said Merrick Lackner, CEO of the online leasing platform Rently.

Jennifer Beeston, a mortgage lender and author, offers the following guidelines:

When Buying Makes Sense

• You are ready to commit to an area.  Whether it is living in the home or holding it as an investment property, plan to hold it for at least 3 years.
• Long-term buying historically is the best move financially, but the key is long-term. 
• If you have children and want to keep them in a specific school district, buying can be a wise choice for stability.  

When Renting Makes Sense

• If you are not sure about an area, rent before you make a decision to buy.
• If you are in a job where you are likely to move for opportunity, renting is a good idea.
• If you do not want to deal with any level of home repair.

Another nuance involves purchasing a condominium vs. a single family home. While the prices may be more affordable, Beeston says there are significant pitfalls.

“Homes traditionally have higher levels of appreciation and more predictable expenses. With a condo you are buying into a homeowners assocation which controls what gets fixed, what the HOA dues are and how much they increase,” she says. “When you own a house, you have control. When you own a condo, the HOA has control. With a condo HOA you really are putting your wallet in someone else hands.”