To most people, owning a home has been seen as a key step into adulthood and a foundation for long-term financial security. Buying a house is considered a wise investment and a sign of stability, benefiting not just the owner but future generations as well.
That used to be the case. In California, that long-held assumption is increasingly being challenged by economics.
As lawmakers and housing advocates across the state push policies aimed at expanding access to homeownership, a growing body of data suggests that buying a home in California is no longer the clear financial advantage it once was. In many cases, renting, especially for higher-income households with disciplined savings habits, can be a more rational financial choice.
A State Where Buying Comes at a Premium
California’s homeownership rate sits at about 55%, the second-lowest in the nation and well below the national average. Researchers at the University of California, Berkeley and other institutions point to one primary reason for that gap: cost.
Nationally, the median price of a detached single-family home is roughly $426,800. In California, that figure jumps to about $852,680. In coastal markets such as San Francisco, median prices often exceed $1 million.
Those prices might be manageable in a low-interest-rate environment, but mortgage rates hovering above 6% dramatically change the equation. Monthly mortgage payments on a typical California home can easily land between $4,000 and $6,000, before factoring in property taxes, insurance, maintenance, and homeowners’ association fees.
By comparison, rents, while undeniably high, remain significantly lower than ownership costs in most major California metros. A recent analysis by CBRE found that in Orange County, the all-in monthly cost of owning a home is roughly four times the average rent. In Los Angeles and San Francisco, the cost of buying is about three times higher than renting. Nationwide, that gap is closer to two times.
The Historical Rulebook No Longer Applies
Economists stress that rent-versus-buy decisions are deeply personal and dependent on timing, location, income, and future plans. Still, many agree that today’s disparity between owning and renting is historically unusual.
Laurie Goodman, an economist with the Urban Institute, notes that the financial relationship between renting and owning has shifted dramatically. In a widely cited 2018 study, Goodman and her colleagues concluded that most households were financially better off buying rather than renting, assuming they could comfortably manage the monthly payments.
That conclusion relied on conditions that no longer exist.
“Current patterns did not continue,” Goodman has said in more recent commentary. Home prices surged, interest rates climbed, and rents flattened in many regions. As a result, homeownership has lost much of its former financial edge, particularly in high-cost markets like California.
Take San Francisco as an example. According to Zillow, the average price of a single-family home in the city is about $1.38 million. Depending on the down payment, that can translate into a monthly mortgage payment of around $6,500. The average monthly rent for a comparable home is closer to $4,350.
For buying to “win” financially, home prices would need to continue climbing at a rapid pace, rents would need to spike, or alternative investments, such as stocks, would have to underperform. Betting on all three at once is far from risk-free.
When Renting Can Build Wealth
For many Californians, the choice between renting and owning is largely theoretical. Data from CBRE shows that in metro areas such as Los Angeles, San Diego, Sacramento, San Jose, and Riverside, only a small share of renters could afford to buy a home without spending more than 40% of their income on housing.
More than half of California renters already spend over 30% of their income on rent, placing them in the category of “housing cost burdened.”
Still, for households that rent by choice rather than necessity, renting can offer strategic advantages. The significant monthly savings created by avoiding ownership costs can be redirected into investments, retirement accounts, or other assets.
While homeownership is often promoted as the primary path to wealth-building, it is not the only one. Over long periods, stock market returns have historically outpaced median home price growth, though they come with greater volatility and fewer tax incentives.
Renting also allows for diversification. Rather than tying a large share of personal wealth to a single illiquid asset, one that requires ongoing maintenance and insurance, renters can spread investments across multiple vehicles.
“I think more people are starting to be interested in renting and saving at the same time,” said Daryl Fairweather, chief economist at Redfin. “They’ve been priced out of owning a home, but they still want to achieve their financial goals.”
The Limits of the Spreadsheet
Even economists caution against viewing rent-versus-buy decisions as purely mathematical exercises. Forecasting future home values, rent trends, interest rates, and investment returns is inherently uncertain.
Fairweather describes the analysis as “murky,” noting that small changes in assumptions can dramatically alter the outcome. Tools like rent-versus-buy calculators, such as one produced by The New York Times, can help illustrate scenarios, but they cannot predict the future.
California’s unique conditions complicate the picture further. High insurance and maintenance costs, widespread rent control protections, and chronic housing shortages all tilt the financial balance in ways that don’t neatly apply elsewhere.
Why People Still Buy
Despite the shifting financial calculus, there are many reasons Californians continue to pursue homeownership.
Space is one of the most common. Rental housing in California is dominated by apartments, while single-family homes are overwhelmingly owner-occupied. Families seeking extra bedrooms, yards, or long-term stability often find few rental options that meet their needs.
School quality also plays a role. Owner-occupied neighborhoods are more likely to align with highly rated public school districts, while rental-heavy areas often face challenges tied to funding, turnover, and infrastructure.
Then there are the intangible benefits: autonomy, permanence, and emotional security. Homeowners can renovate, personalize, and plan long-term without fear of rent hikes or lease nonrenewals.
There is also the concept of “forced savings.” While renters theoretically can invest the difference between renting and owning, doing so requires discipline. Mortgage payments, by contrast, automatically convert part of each paycheck into equity.
“It takes more discipline to go against the social trend,” Fairweather said. “Saving voluntarily is harder than paying a mortgage.”
Rethinking the California Dream
All this is not to say that home ownership is a poor decision across the board. For households with stable incomes, long time horizons, and a desire to stay put, buying can still make sense, financially and emotionally.
However, California’s housing market no longer supports the idea that buying a home is always the smartest or safest financial move. In today’s environment, renting is not merely a fallback option; for many, it is a deliberate strategy.
As policymakers continue to search for ways to expand access to ownership, the broader conversation needs to evolve further. The California dream, once synonymous with owning a home, is increasingly defined by flexibility, financial resilience, and choices that extend beyond the front door.
