Rent vs. Buy a Home in Portland, Oregon? A Financial Calculation 2023

In their 2022 Housing Survey, NeighborWorks America found that nearly nine in ten Americans agree that homeownership is important, and many see both increased feelings of security and connection to their community as significant benefits of owning a home. In reality, being a homeowner extends beyond the property itself to a sense of ownership and shared responsibility in the neighborhood, which leads to more involvement in the community and reduced crime, among other benefits. While owning a home is rewarding, there are times when renting may be a better fit. We’ll explore the options for each in light of the current housing market.

Factors to Consider When Deciding to Rent or Buy

The first and most obvious consideration is finances: buying a home involves an initial downpayment, property taxes, utilities and maintenance, while renting usually requires a two-month deposit and fees for amenities such as owning pets or the use of a garage. And while both require a monthly financial commitment, mortgage payments build equity as they whittle down a loan, while rent goes directly to a landlord with no financial return.

So why rent? It comes down to the issue of flexibility. If you find yourself in a season of life in which the ability to move at the end of a lease is desirable due to fluctuating job demands, the desire to travel or another unpredictable life scenario, renting in the meantime may make sense. However, if you have stable employment and the desire to settle in a certain city or suburb for a few years, buying offers you the most financial advantage with appreciation on your investment and the added benefit of deducting interest payments from your federal taxes.

Renting vs. Buying in 2023: Doing the Math

This helpful rent vs. buy calculator helps to determine if and when buying is more affordable than renting, and vice versa, referred to as the “breakeven horizon”. Factoring today’s mortgage rates with current average home prices in the Portland area (assuming the national down payment average of 12%) and average rental rates reveals that it is financially advantageous to buy a home if you are planning to live there for at least five years and nine months. In other words, when contrasting the costs of each over time, this this is the point at which owning becomes cheaper than renting. Mostly due to both high interest rates and home prices – driven by inflation and low inventory respectively – this time period is longer than just a year ago, when homeownership became more affordable than renting after three years and six months.

Portland Rents are Rising, Along with Interest Rates

After a couple years of lower rental rates in Portland they began to climb back up last year, and at their current prices hovering above $2,500, it is more financially advantageous to buy and allow those monthly housing costs to build equity, even with the high interest rates – as long as you plan to stay in the home for a few years.

In fact, we believe 2023 is a golden year of financial opportunity in the local Portland real estate market. Read the article to find out why.

Downpayment Assistance and Grants for Homebuyers

Mortgage rates in 2023 are even higher than last year, fluctuating above 6% (6.26% for a 30-year fixed mortgage as of the date of this article), making homeownership prohibitive for some buyers. But don’t be deterred by high interest rates: every year we update the list of downpayment assistance and grant options for homebuyers. Find it here.

Supplemental Income from Homeownership

The new zoning laws of the Portland Residential Infill Project have provided a way for most homeowners to add not one, but two ADUs to their property, and with less restrictions. This can not only provide potential rental income, but also increase the value of your home. According to our annual ADU report, the average sales prices of Portland homes with ADUs are 8% higher than those without.

Additionally, if you are looking to buy a home with an existing ADU, you can use its current or potential rental income to help you qualify for a loan. A great resource is Portland Homes for Sale, which features an “extra living quarters” filter that allows you to discover properties either with ADUs or the potential to add them.

Invest in Financial Security

In the long term, building equity through homeownership is a reliable path to financial security. Buying a house is often the biggest investment you will ever make, and can also be the most rewarding in regard to life satisfaction and financial return. Let us help guide you in this important decision to move toward homeownership. We have decades of experience working with buyers and sellers in the Portland market and would love to put our expertise to work for you. Call our top buyer’s team at 503-773-0000 to get started. Or if you would like to work with an expert Realtor to sell your home, call 503-714-1111 to set up an appointment today!

March 13, 2023

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

4% max to sell a home in Portland and SW Washington.
4.25% max to sell a home in Salem and Bend.
Over 2,000 homes sold.