Rent vs. Own:

I have always wondered whether it makes more sense for me to own a home or rent. I have discovered that there is no simple answer; what is best depends on lots of variables. But since I really wanted to figure out the financial numbers, I made a spreadsheet that compares renting and owning on equal terms. I assume that the renter will invest the downpayment and the difference between rent and PITI. It turns out that in many cases the renter is better off, especially if the housing values drop or if they move in just a few years. After running these numbers I decided I would be better off over the long term if I bought, and I did indeed buy a condo.

If you want to play with the excel spreadsheet, here it is (created with MS Excel 5 on a Mac, but usable with Excel on a PC):

Rent vs. Own Spreadsheet

Condo vs. Detached House:

I have heard from several sources that condos don't appreciate at the same rate as detached homes do. While this makes sense in certain inefficient markets, it can't hold as a general rule, or else eventually the difference between home prices and condo prices would keep diverging and condos would be affordable by everybody and houses by nobody.

So to test this hypothesis in my area (California Bay Area Penninsula, a very hot market), I calculated the average growth rates of condos and houses, by averaging published comparison values from the San Francisco Examiner (Sunday Dec. 7, 1997). These growth rates are from November '97 to May '97 (half a year), and I multiplied by 2 to get a yearly growth rate. These rates are for resale prices of actual residences in San Mateo County. Each of these rates is an average of nine different properties in different cities.

Average yearly actual Condo growth: 7.8%
Average yearly actual Detached House growth: 8.5%

I also found an article in the Redwood City Tribune from Sunday Nov. 30 1997, which had the Median and Average prices for all condos and detached homes through 3rd quarter 1996 and 1997. I calculated the yearly growth from these figures as:

Yearly San Mateo County Condo growth: 12% median, 15% average
Yearly San Mateo County Detached House growth: 16% median, 16% average

Of course these growth values are not normal; this is a boom period. But this at least shows that in a boom period Condos can come very close to keeping up with detached houses.

If anyone has other data, I am particularly interested (but no single-property anecdotes, please).

On the basis of these numbers, if you are faced between a condo and an equivalently priced and featured home, then get the home. But if the home with the features you need is significantly more than the condo that has those features, then get the condo. Of course this is a purely financial comparison; there are other considerations which you need to take into account.