SAN FRANCISCO (KGO) --The tech industry has brought a huge amount of wealth to our Bay Area. That's good news for the economy and for real estate values. Now rents and home prices are both rising so fast, it has many wondering which is cheaper -- renting or buying.
Rents are shooting up, so are home prices. Now the running joke on the street is, you can buy or rent, just not in the Bay Area.
However, I couldn't leave it at that. Instead, I took a look at the best options for anyone looking for a place to live. Do you rent? Or do you buy?
Jonas Gosbeck and Jonas Olssom share the same first name and the same too-small apartment in San Francisco.
"When it's very crammed you can feel a little stressed," Olssom said.
It has one tiny closet overflowing with stuff and a kitchen so narrow the refrigerator barely opens. The rent, $2,500 a month, feels like money down the drain.
"For what we're paying in rent now, I think we could get a little bit bigger place," Olssom said.
Or can they? Rents are skyrocketing and so are home prices. And the Jonases face a big question -- which is cheaper, to rent or buy?
"It's a hard choice to make, definitely," Olssom said.
Daren Blomquist, the vice president of RealtyTrac said, "Unfortunately it's bad on both sides, if you're a renter or a buyer." He says renting and buying are both unaffordable for middle income residents in much of the Bay Area. That means housing costs more than 30 percent of their salaries in the five-county region. "It's a very highly desirable place to live and the economy is doing very well, unemployment is low and so that's pushing up prices."
However, he said rents are actually lower than mortgage payments on average in most counties. In San Francisco a three-bedroom unit rents for $2,600 on average. The average mortgage payment is $4,600. RealtyTrac also found average rents are lower than mortgage payments in Marin, San Mateo, Santa Clara and Alameda counties. However, that doesn't necessarily mean it's better to rent.
"If you are staying in a house for more than two-and-a-half years, you will want to buy that house," Svenja Gudell from Zillow.Com said. She says it's a race between rental rates and home values. "Currently, rental rates are going up faster."
She says buying will cost you more up front, but the rent for the same house will go up while house payments will stay the same. So, eventually the rent would cost more than the mortgage.
Zillow says if you buy in San Francisco right now, you will break even in just 2.8 years.
"That is currently being driven by home values appreciating relatively fast and rental rates also appreciating," Gudell said.
Here's how fast it is in San Francisco -- a 760 square foot cottage in the Mission District sold for $450,000 two years ago, but according to Zillow, today it's offered for $2.4 million.
And one charming home in Glen Park is offered at $2.4 million, but the house doesn't even exist. They offer a plan and you'd build it yourself.
Rents can be crazy too. A small two bedroom apartment in the Castro rents for $6,000 per month. Another studio has a nice view, but it's $12,000 per month. That makes Jonas and Jonas want to buy instead of rent, if they could.
"You need to have the money for it, right... unfortunately," Gosbeck said.
Buyers must be ready with a big down payment, possible bidding wars, and competition from buyers with all cash offers.
"The recent tech boom is really helping to create a lot of folks who have a lot more income," Blomquist said.
"To put it bluntly, you guys are on fire," said Gudell.
The rental rates posted by RealtyTrac include housing in every neighborhood of each county. However, a $2,600 average? Good luck finding that in this market, as I showed you, new rentals easily run double or triple that amount.
Here are some helpful links so you can look up the rents and home prices in your county -- or any other.
U.S. Real Estate Trends & Market Info
47 Least Affordable U.S. Housing Markets