Rent vs. Buy in San Diego: Running the Actual Breakeven

Key takeaways

• On a median San Diego County home ($925,000) financed with 20% down at 6.50%, the model shows owning pulling ahead of renting-and-investing only in the 5% appreciation scenario, and only from year 5 onward. At 0% and at 3% appreciation, owning does not catch up within 25 years.
• The first-year gross cash cost of owning that home is $77,267, or $6,439 a month. That is principal and interest, property tax, homeowners insurance, and maintenance, added line by line. Against $47,844 a year to rent a comparable three-bedroom, the model shows owning costing about $29,400 more in year-one cash.
• The federal mortgage interest deduction is worth an estimated $8,360 in year one for this loan, but the model shows it shrinking to about $3,077 by year 10, because mortgage interest amortizes down and because the SALT (state and local tax) cap reverts to $10,000 in 2030 under current law.
• Proposition 13's 2% cap on assessed-value growth is the mechanism that most helps a long hold in California. By year 20 in the model, an owner who bought at $925,000 pays $3,257 to $11,877 less in annual property tax than someone buying the same house fresh that year, depending on the appreciation scenario.
• The rent you compare against changes the answer more than any other single input. Against the three-bedroom comparable ($3,987), the 5% scenario breaks even in year 5. Against the all-unit-type average ($2,968), no scenario in the model breaks even within 25 years.
• In every scenario modeled below, a hold under five years does not recover the combined cost of buying and selling. Proposition 19 changes the tax-base arithmetic for owners 55 and older, owners who are severely and permanently disabled, and victims of wildfire or natural disaster.

The assumptions

Every input below is either sourced to a specific dataset or stated as a modeling assumption you can substitute with your own numbers. The full year-by-year computation was run in Python, and the tables further down are its direct output.

What the model does not include: renters insurance, capital gains tax on the renter's portfolio, the primary-residence capital gains exclusion on sale, and any rental security deposit. The first two omissions cut in opposite directions and roughly offset.

The first-year cost, reconciled line by line

At $925,000 with 20% down, the loan is $740,000. Here is every line in the buyer's first year of cash outflow:

Against that, renting the three-bedroom comparable costs $47,844 a year ($3,987 a month), and renting at the all-unit-type average costs $35,616 a year ($2,968 a month). Owning is the more expensive monthly option in either comparison, and the model shows it staying that way, since assumed rent growth (3%) runs below the growth in ownership costs, where taxes, insurance, and maintenance all climb.

That is the starting point. If the case for buying rested on the payment alone, it would not clear. It rests on what happens to net worth over time: home equity from principal paydown and appreciation, against what a renter's unspent cash earns if invested instead.

The breakeven table

For each appreciation scenario, the model tracks two parallel paths starting from the same $208,125 in day-one cash (down payment plus buying closing costs). One path buys the home. The other invests that cash and rents. In every year, whichever path costs less in cash invests the difference at the 6% assumed return. The table shows the gap in net worth (home equity net of a hypothetical sale at 7.5% selling cost, versus the renter's invested portfolio). A positive number means owning is ahead. A negative number means renting-and-investing is ahead.

Because the choice of rent comparable moves the result more than any other input, both comparables are shown as co-equal scenarios rather than one base case and one footnote.

Three things stand out. First, appreciation does almost all the work. Second, the widely repeated “5 to 7 year breakeven” rule of thumb holds in this model only at the 5% appreciation end, and only against a size-matched rental. Third, the 3% scenario, which sits close to San Diego's most recent 12-month appreciation reading of 3.9%, does not break even within 25 years in either comparable. In Scenario A the 3% gap is at its narrowest in year 4 (-$91,328) and widens after that.

The mortgage interest deduction

Buyers often assume the mortgage interest deduction is worth the full amount of interest paid, taxed at their bracket. It is worth the amount by which itemized deductions exceed the standard deduction, and only if the household itemizes at all.

For the household in this model, first-year mortgage interest is $47,856. The SALT deduction (property tax of $10,175 plus an assumed $9,000 of state income tax) comes to $19,175, under the 2026 SALT ceiling of $40,400, so it is fully deductible. Combined itemized deductions total $67,031. Subtract the $32,200 standard deduction for married filing jointly, and the marginal benefit is $34,831, taxed at an assumed 24% marginal rate: an estimated $8,360 in year-one tax savings.

By year 10 the model puts that benefit at $3,077, a steeper decline than the amortization schedule alone explains. Two forces compound. Mortgage interest falls to $41,304. And under current law the SALT cap reverts to $10,000 in 2030, which caps this household's state and local tax at $10,000 from year 5 onward (by year 10 that base is $21,400), while the standard deduction keeps indexing up.

The deduction is not decoration in this model, and it is not a rescue either. Removing it entirely moves the 5% breakeven from year 5 to year 8 and leaves the other two scenarios unchanged, because they never break even in the first place.

Prop 13: the long-hold advantage generic calculators miss

Almost every national rent-vs-buy calculator treats property tax as a flat percentage of current market value, which is how most states work. California does not work that way. Under Proposition 13, assessed value is set at the purchase price and can grow no more than 2% a year, regardless of how fast the market moves, until the property sells.

In the model, that shows up directly. By year 20 at 3% appreciation, the home's market value has grown to $1,670,653, while the Prop 13 assessed value sits at $1,374,501. The owner pays $15,120 a year in property tax against the $18,377 a fresh buyer would pay purchasing the same house at its year-20 market value: a savings of $3,257 a year that repeats and grows every additional year of the hold. At 5% appreciation, market value by year 20 reaches $2,454,300 against the same $1,374,501 capped assessment, and the annual savings versus a fresh buyer grows to $11,877.

This is the mechanism the supplemental tax bill and Mello-Roos guides on this site walk through from the buyer's side.

When buying is the right call

The scenarios where the model puts owning ahead share a small number of features.

A long, uninterrupted hold. Every positive number in the tables above sits at year 5 or later, and the gap compounds from there. In the 5% scenario against the three-bedroom comparable, owning is $4,367 ahead at year 5 and $729,947 ahead at year 25. The Prop 13 base lock is the reason: the owner's tax bill grows 2% a year while a fresh buyer's grows with the market, and that spread widens for as long as the hold lasts.

Appreciation at or above roughly 4.5% a year. At 4.5% the model breaks even in year 7, which lands inside a conventional holding period. San Diego's trailing 12-month reading of 3.9% sits below that line, but the county has spent long stretches above it.

A cash outlay smaller than 20% down plus closing costs. The $208,125 the buyer puts in on day one is the renter's entire invested head start in this model, and it is what the buyer has to out-earn. A VA loan at $0 down removes almost all of that head start, which materially changes the arithmetic. The model above does not assume a VA loan, so a VA-eligible buyer should treat these tables as a conservative floor.

A stable duty station or a non-mobile career. The tables punish short holds because the 7.5% selling cost applies whether or not the market cooperated. The mirror image is that a household with high confidence in a 10-year-plus stay in San Diego County is the one that captures the compounding, and that confidence is worth more to the outcome than any single financial input except appreciation.

A size-matched rental comparable. If the realistic alternative is a three-bedroom house rather than an average apartment, Scenario A is the relevant table, and it is the one where owning wins in the 5% case.

When renting is the right call

The scenarios where the model puts renting-and-investing ahead also share a pattern.

Uncertain time horizon. San Diego is a major military market. A service member who receives Permanent Change of Station (PCS) orders in three years is behind in every scenario in both tables above, by $36,569 at the best and $210,061 at the worst. Selling costs apply whether or not the market cooperated, and they are the largest single reason short holds lose money in this model.

Job mobility. The same arithmetic applies to any household with a real chance of relocating for work within five years. At 3% appreciation, close to the current 12-month reading, the model shows no breakeven within 25 years in either rent comparable.

HOA and CFD stacking. A lot of San Diego's newer inland and North County construction carries both. Stacked at $650 a month, they push the first-year gross cash cost to $85,067 and move the only breakeven in the model, the 5% scenario, from year 5 to year 9.

A cheaper realistic alternative. If the household would rent an apartment at the all-unit-type average rather than a three-bedroom house, Scenario B applies, and no scenario in it breaks even within 25 years.

Prop 19 and the tax base

Proposition 19 allows two distinct groups to carry an existing, Prop 13-protected assessed value to a replacement primary residence anywhere in California.

Homeowners who are age 55 or older, or severely and permanently disabled at any age, may do this up to three times.

Victims of a wildfire or Governor-declared natural disaster may do this as well, and the three-transfer limit does not apply to them. The conditions are otherwise the same as for the 55-and-older transfer, except there is no age requirement, and the original property must have been substantially damaged or destroyed, with over half its market or improvement value diminished. See the Prop 19 guide and the Board of Equalization fact sheet in the sources below.

For a household in either category, the model's long-hold arithmetic changes, because a move does not have to reset the tax base to a fresh purchase price the way it does for everyone else. The tables above assume a reset, so they understate the modeled outcome for owners who qualify to carry their base forward.

Common questions

Is it cheaper to rent or buy in San Diego right now?

On a cash-flow basis, the model shows renting cheaper: $47,844 a year for a three-bedroom, or $35,616 at the all-unit average, against a $77,267 gross first-year cost to own. Owning wins only on a net-worth basis, and only after a breakeven the model reaches in one of six scenarios.

What is San Diego's actual breakeven horizon for buying?

In this model, year 5 at 5% annual appreciation against a three-bedroom rental. In the five other scenarios modeled (0% and 3% appreciation against either rent comparable, and 5% appreciation against the all-unit average), owning does not catch up within 25 years. Your own down payment, loan rate, and rent comparable will move this.

Does the mortgage interest deduction make buying worth it on its own?

The model says no. It is worth an estimated $8,360 in year one and $3,077 by year 10, and only if itemized deductions clear the standard deduction. Removing it entirely moves the one breakeven in the model from year 5 to year 8.

How much does Prop 13 actually save a long-term owner?

In this model, $3,257 a year at 3% appreciation and $11,877 a year at 5% appreciation by year 20, versus what a buyer purchasing the same house fresh that year would pay. It repeats and grows for every year of the hold.

What if I might get orders or a new job in the next few years?

Look at the 3-year and 5-year rows. In every scenario modeled, a hold under five years leaves owning behind renting-and-investing, because the combined buying and selling costs are not recovered.

Does HOA or Mello-Roos change the answer?

Stacking a $300 HOA payment and a $350 CFD special tax adds $7,800 a year to the gross cash cost and moves the only breakeven in the model, the 5% appreciation case, from year 5 to year 9. The 0% and 3% scenarios have no breakeven within 25 years, so there is nothing to push out. Confirm both line items for a specific address.

Run your own numbers

Every figure above is a stated assumption or a sourced average, not a quote for any specific property. Prop 13 resets, Mello-Roos exposure, HOA dues, insurance costs, and loan terms all vary by address. Generate a free report for the exact property you are evaluating, with every line item sourced and dated. If you are weighing keeping your current home as a rental while buying the next one, try move-up mode, which models both paths using the same 75% rent-qualification rule a lender applies.

Related reading

• How Much Income It Takes to Buy a $1M Home in San Diego
• Wildfire Insurance in San Diego
• Mello-Roos by Community in San Diego
• What Is Mello-Roos? A San Diego Homebuyer's Guide
• The Supplemental Tax Bill Surprise
• VA Loans in San Diego: True Cost vs. FHA
• Prop 19 for Move-Up Buyers
• Chula Vista property report
• Oceanside property report
• Carlsbad property report
• El Cajon property report

Sources

• San Diego Association of Realtors, Market Activity Report
• RentCafe / Yardi Matrix, San Diego rental market trends (average rent by unit size, updated June 2, 2026)
• NeighborhoodScout, San Diego real estate appreciation
• IRS, tax inflation adjustments for tax year 2026 (Rev. Proc. 2025-32)
• One Big Beautiful Bill Act, Pub. L. 119-21, enrolled text
• Bipartisan Policy Center, SALT Deduction Changes in the One Big Beautiful Bill Act
• California State Board of Equalization, Proposition 13 information sheet
• California State Board of Equalization, Proposition 19
• California State Board of Equalization, Publication 801, Proposition 19 Fact Sheet
• Insuranceopedia, San Diego homeowners insurance cost data