By Ben Christopher, CalMatters
This story was originally published by CalMatters. Sign up for their newsletters.
It’s the benchmark of success, a milestone of responsible adulthood, a time-tested way to amass wealth for you and your progeny. Homeownership, we’re told again and again, is a status that every right-thinking person should aspire to — the white-picket-fence-fronted embodiment of the American Dream.
But what if it’s also a little overrated?
For generations it has been taken as a near article of faith across the country that ownership is both the financially and socially superior way to inhabit a home and that public policy makers should always promote it. California legislators and housing advocates spent this past year enacting sweeping policies aimed at making it easier to build housing of all kinds. This coming year, many of them indicate that they plan to focus specifically on providing more plentiful paths to homeownership.
They’ll have their work cut out for them.
The state’s homeownership rate of roughly 55% is second lowest in the nation, above New York, and a full 10 percentage points beneath the national average. Most of that gap, both common sense and researchers at UC Berkeley tell us, isn’t the result of an atypical fondness for the freedoms of renting but comes down to the price tag. The median price of a detached single-family home across in the United States is $426,800. In California, it’s $852,680. In San Francisco it’s well over $1 million.
With borrowing rates still hovering above 6%, those prices translate to estimated monthly mortgage costs between $4,000 to $6,000 or more. Even in all but the toniest neighborhoods of coastal California, that’s far above the cost of renting a typical apartment.
In Orange County, the estimated all-in monthly costs on a home (including taxes, insurance, maintenance and any association fees) is four times the average rent, according to a recent analysis by the commercial real estate firm CBRE. In Los Angeles and San Francisco, the “buying premium” is three times greater than renting. Nationally, it’s twice as much.
Is the extra cost worth it?
Economists and housing finance experts are careful to note that it depends — on a person’s financial circumstances, the particulars of their preferences and the market in which they want to live, how long they plan to occupy a home and, most challenging of all, what the future holds.
But across the country, the gap between renting and owning is “way out of line” with the historic norm, said Laurie Goodman, an economist at the Urban Institute, a liberal-leaning thinktank in Washington D.C.
In 2018, Goodman co-authored a paper on homeownership in the United States, which came to the fairly unambiguous conclusion that most people most of the time would be better off buying a home (assuming they can afford the monthly payments) compared to renting.
“Homeownership is not the universal panacea, but the financial returns on homeownership have been more beneficial than renting for most homeowners and will likely remain so if current patterns continue,” Goodman wrote in a corresponding blog post at the time.
Current patterns did not continue: Today we see dizzying prices and interest rates and flat rents in most places. Homeownership isn’t nearly the financial slam dunk it once was, she said.
Take a market like San Francisco. The average price of an admittedly rare single-family home in the city is $1.38 million, according to Zillow. Depending on the size of a buyer’s downpayment, that would work out to a monthly loan payment of roughly $6,500. The average rent for one is $4,350.
In order for all those extra monthly payments to eventually pay off, the value of the house will need to soar vertiginously into the indefinite future. Or rents, which determine how much a person can save by not buying, will need to shoot up as well. Or the stock market or other possible places a well-heeled renter could park all the extra money they aren’t spending on a mortgage, will need to flatline.
Or a combination of all of the above.
A person buying into that market is assuming a very specific and by no means certain version of the financial future, said Goodman.
Either that, or they’re just “desperate to own in San Francisco because they’re just desperate to own in San Francisco,” she said. “For whatever reason.”
The case for renting forever
For many Californians, this isn’t actually a decision. The number of renters who can buy locally and get away with spending anything less than 40% of their income on monthly homeownership costs are in the single digit percentages in Los Angeles, San Diego, Riverside, Sacramento, San Jose and Ventura, according to the CBRE report. Being a tenant in California is hard enough. More than half of California renters are spending more than 30% of their income on rent as it is.
But for those lucky enough to rent by choice, it’s not necessarily a bad choice to make.
Remember that yawning “buying premium” between the monthly cost of owning and renting? A wealthy tenant is in a position to save and invest the difference. Though homeownership is often touted as the best way to build wealth, it’s not the only way. It might not even be the best way: On average and over long stretches of time, the stock market regularly outperforms median home prices — albeit, without quite so many tax benefits and other boosts that federal and state governments shower upon homeowners.
Rather than pouring every last dollar in disposable income (and then some) into a single asset that threatens to leak when it rains, parking that money elsewhere also allows a renter the option to diversify.
“I think more people are starting to be interested in renting and saving at the same time, because they’ve been priced out of owning a home, but they still want to achieve their financial goals and they’re looking into those alternatives and getting more savvy about it,” said Redfin economist Daryl Fairweather.
Running the numbers on whether renting and saving is, in fact, the better financial call gets very “murky,” she said. Much of it depends on the future of home prices, local rents, stock prices, interest rates and how long a person plans to stay put. It’s a hugely complex and individual choice and it’s not risk-free. Fairweather touted an online rent-vs-buy calculator produced by the New York Times.
But with California’s specific conditions — high prices relative to rents, high maintenance and insurance costs, the relatively large number of tenants protected by rent control policies of one kind or another — the financial argument for renting may be about as good as it’s ever been.
The perks of owning property
Even if renting is a better deal on paper, there are plenty of reasons someone might want to buy that have nothing to do with money.
Space is one: For a host of regulatory and financial reasons, the vast majority of rental units are apartments while detached single-family houses are predominantly reserved for owners. Especially for growing families, the option is often either to cram your spouse and kids into an urban apartment or drive out of the city (and possibly out of the state) until you can afford to buy.
Education is another. Rentals are also more likely than owner-occupied units to be in neighborhoods with poorly performing public schools and elevated crime rates.
For some, homeownership also comes with an entirely non-monetary warm and fuzzy factor, whether it’s independence — deciding when and what color to paint your walls, for instance — or a sense of security.
Finally, just because someone can save and invest the extra hundreds or thousands of dollars a month that would have gone to a mortgage payment, that doesn’t mean they will. No one likes making a mortgage payment, but by converting part of your paycheck each month into home equity, it acts as a kind of forced savings plan. It’s perpetually tempting not to save.
“It takes more discipline to go against the social trend,” said Fairweather.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
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Bottom line, as always – live within your means. Not everyone can afford to buy or even rent in a highly desirable place. Not everyone can afford to have 3-5 kids for that matter. No one is entitled to doing whatever they want and getting the government and their fellow citizens to support their poor personal choices. There are a heck of a lot of great and affordable places to live in the U.S.
“No one is entitled to doing whatever they want and getting the government and their fellow citizens to support their poor personal choices.”
Funny, the biggest welfare “queens” are the lazy MAGA supporters in poor red states where housing IS affordable yet they still can’t manage to wean themselves from my tax dollars.
Actually CA has the highest number of people on welfare and percentage wise CA is number 19 with 13% on welfare. Nothing to be proud of.
Although i think the article is titted toward renting by comparing rent for a single person to the cost of a mortgage. From my experience even if a single person buys a home they are not living there alone.
Sick and disgusting, disease ridden, morally bankrupt, and MAGA infested Florida has a higher percentage than California with half the population. Go figure.
CITIZEN – read your comment out loud to yourself. Now, read it again. Onr more time for good measure…
The only stat that is relevant is the percentage (rate). Of course we have more people on welfare here, we have more people in CA than most countries. No brainer and doesn’t mean a thing
Now, the #19 out of 50 is the mote important number – the percentage of our population on welfare. There are 18 other states, mostly MAGA RED that have a higher rates of welfare recipients in their populations.
Go learn the difference. Also, next time you try to use stats, provide the link like a grown up.
Data from the Pew Research Center and the U.S. Department of Agriculture (USDA) indicates that while recipients of government assistance come from both parties, Democrats are more likely to utilize traditional public welfare programs such as food stamps (SNAP) and Medicaid than Republicans.
KAPO – how about you provide a cite to that claim you just lifted?
https://www.pewresearch.org / https://www.usda.gov
KAPO – the ACTUAL pages that support your claim. Come on man, you know how to do this. Or do you?
The Repuglican is always the one that is unwell enough in the head to believe that they have their life under 100% control, are better than others, and should tell others how to live their lives, what to think and what to say.
Glad to do some research —
https://www.nytimes.com/2025/10/31/us/fact-check-trump-snap-food-stamps.html?smid=nytcore-android-share
Democrats are the top welfare users.
And, if you do that research with some critical thinking involved, you might wonder if it’s because tRump is preferentially withdrawing SNAP funds from Democratic-led states.
Hopeful thinking is not critical thinking.
Here is a 2012 study. Democrats still biggest welfare users.
A Bipartisan Nation of Beneficiaries | Pew Research Center https://share.google/gytdYSLN6CeF1x2w7
You’ll find that that proportion changed dramatically after the first tRump administration. That data point is from more than 13 years ago.
Research?
https://www.congress.gov/119/meeting/house/118494/documents/HHRG-119-JU13-20250715-SD014-U14.pdf
Additionally, the demographic in those states being harmed the most is the cohort of poor and uneducated, which also happens to be the tRumpie demographic.
From 2018 to 2022, individuals and organizations from blue states contributed nearly 60% of all federal tax receipts but only received 53% of all federal contributions to states in the form of either direct payments, grants, contracts, or wages. Meanwhile, red states were only responsible for 40% of federal tax receipts but received 47% of all federal contributions to states. A 7% differential that in effect equates to a more than $1 trillion transfer payment from blue states to red states, amounting to $4,300 per capita, compared to the instance where their respective fair shares were paid.
Regardless of you political affiliation, you should be appalled by how many of your fellow citizens will be harmed by this administration’s idiotic policies.
https://gsas.harvard.edu/news/how-snap-cuts-will-impact-american-communities
Republicans are starving families. Literally.
Not sure why the comments went from home ownership vs renting to welfare.
Yes CA provides a larger share of tax revenue to that feds than they get back.
It is also true in the county Montecito pays a larger share of property and sales tax that they get back.
Perhaps CA should create their own country and Montecito their own city.
Back to homeownership: maybe the biggest advantage—one the article doesn’t cover—is predictability. Your mortgage payment is typically fixed, while rent tends to rise. And under Prop 13, property taxes can increase by no more than 2% per year.
There’s also the long game: if you can pay off the mortgage, even if it takes 30 years, the ongoing cost of owning can look remarkably low. On top of that, building equity over time is a major benefit.
Insurance is the painful wildcard, but if the mortgage is paid off, you have more flexibility—at that point, you can decide how much coverage, if any, you really want to carry.
I can remember when our mortgage payment was 40% of our paychecks, but over a few years it was less and less and now it is zero. Finances become so much easier over time, likely not the case with renting.
“Not sure why the comments went from home ownership vs renting to welfare.”
Well, if you read back, you interfered with Sacjon’s comment that was directly to Basic and Basic had completely changed the subject to ” 3-5 kids for that matter. No one is entitled to doing whatever they want and getting the government and their fellow citizens to support their poor personal choices.” That’s when you inserted yourself and when you made an argument about what states receive the highest amount of welfare.
Punt!