Rent vs. Buy in Portland: How to Actually Run the Numbers

The comparison almost everyone makes is rent against the mortgage payment. It is the wrong comparison, and it is wrong in both directions depending on who is making it.

A landlord’s version leaves out that your rent buys you nothing and rises forever. An agent’s version leaves out maintenance, taxes, insurance and the six percent it costs to get out. Here is how I actually run it, and I will tell you up front that the answer is sometimes rent.

What renting really costs

Rent, renters insurance, parking or storage if you pay for them, and the increase you get every renewal. That is close to all of it.

The part people undervalue is what renting buys you besides shelter: the ability to leave in thirty days, and somebody else’s problem when the water heater fails. Those have genuine worth, particularly if your job or your household could change inside two years.

What owning really costs

Principal, interest, property tax, homeowners insurance, mortgage insurance if you are under 20% down, HOA dues if there are any, and maintenance.

Then the transaction costs on both ends. Buying costs you closing costs. Selling costs you agent commissions, title and escrow, excise or transfer tax where it applies, and whatever repairs the buyer negotiates. Those two together are the reason short holding periods lose money.

Two of those lines cut the other way and belong in the analysis. Principal payments are not an expense, they are forced savings, so they come back to you at sale. And appreciation, if you get any, accrues on the whole value of the house rather than on your down payment, which is the single largest financial argument for owning.

The break-even, not the monthly

The real question is not “is my payment more or less than my rent.” It is how many years until buying comes out ahead of renting, and whether you will be there that long.

The break-even is usually somewhere in the three to seven year range, and where it lands depends on four things: how much you put down, what your rate is, how fast rents rise, and what the home does in value.

Two rules of thumb I use with people:

• Under three years, renting almost always wins. Transaction costs alone eat the difference.
• Over seven years, owning almost always wins, unless you bought at a genuine peak.

The interesting cases are in the middle, and those are worth actually calculating rather than guessing.

What the Portland metro looks like right now

The metro median sale price is running around $554,000, down about one percent year over year, with median days to pending at 42 and about three months of supply. That is a balanced market, not a hot one and not a crash.

Two things follow from that. First, you are not competing against six offers, so you can take your time and use contingencies. Second, you should not underwrite this purchase on appreciation. If the deal only works because the house goes up eight percent a year, it is not a deal, it is a bet.

The county picture is not uniform either. Multnomah is around $538,000, Washington County around $565,500, Clackamas around $650,000. New construction price points sit across that range and often below it. As I write this, the LGI communities I sell start in the $370,000s in Woodburn and the $410,000s in Battle Ground. That matters for a rent versus buy comparison, because the relevant number is not the metro median, it is the price of a home you would actually buy.

The market data page refreshes weekly if you want current numbers rather than these.

The five questions that decide it

1. How long will you be here?

The most important input by a distance, and the one nobody wants to answer honestly. If there is a real chance you relocate inside three years, rent.

2. Is your income stable?

A landlord can be given thirty days notice. A mortgage cannot. If your work is commission-heavy, seasonal or newly started, weight that heavily.

3. What happens to your emergency fund?

If buying takes your reserves to zero, you have bought a house you cannot afford to maintain. I want people closing with the down payment spent and several months of expenses still in the bank.

4. Are you comparing like with like?

A $2,000 two-bedroom apartment and a $3,200 four-bedroom house are not the same purchase. Compare the apartment against a comparable rental, or the house against what that house would rent for.

5. What does the maintenance line look like?

On a resale home this is a real annual number. On a new build the first years are close to nothing, which is a genuine advantage and one of the reasons new construction pencils better than people expect. I broke that out in the maintenance budgeting post.

When I tell people to keep renting

Regularly, and it costs me a commission every time.

• You might move for work within two or three years.
• Buying would empty your savings entirely.
• You are carrying high-interest debt that a lower rate elsewhere would beat.
• Your credit is a few months of work away from a materially better rate. Waiting to fix that is often worth more than waiting to save more.
• You are buying because you feel behind, rather than because the numbers work.

That last one is the one I see most, and it is the worst reason to buy a house. I have written more directly about the situations where I say no.

How to actually run it

Start with the rent versus buy calculator on this site. Put in your real rent, the real price of a home you would buy, your real down payment, and an honest number of years.

Then do the thing most people skip: run it a second time with appreciation set to zero. If buying still wins over your actual holding period, the decision is solid. If it only wins on appreciation, you have learned something important about how much risk is in the plan.

When you want a version with real numbers on a specific house rather than a generic one, send me the address and I will build it out. If it says rent, I will tell you it says rent.