Recently I talked with a client who is considering buying a house in Sonoma County. As you might know, the housing market here in the Bay Area is variously described as “crazy,” “red hot,” “ridiculous,” and “divorced from reality.” A similar situation prevails in many cities and towns across the country. Should a smart home buyer take the leap now or wait and hope for prices to drop? How do you evaluate whether renting or buying is the best strategy?
The comment sections of innumerable personal finance blogs are strewn with the wreckage of the battle—no, the war—around this question. It’s nearly as hot as the debate over whether to pre-pay a mortgage or not (don’t get me started). As a math major, I like to look at the numbers myself, play with calculators, build my own spreadsheets. After hours of work on this my definitive answer is “it depends.” Seriously. It depends on a bunch of factors, but actually pivots on one big factor.