A couple living in a one-bedroom apartment in Pasadena had a baby. While looking for a new place to get an extra room, they were shocked by the rental prices. They realized that moving to a two-bedroom would cost them significantly more each month.

This led them to a natural thought: if they are going to pay this much in rent, wouldn't it be better to buy a house instead? A useful concept to consider in this situation is the price-to-rent ratio. This is the value obtained by dividing the purchase price by the annual rent, showing how many years of rent would be needed to buy the home they are currently renting.

Looking at Pasadena's numbers, the average home value according to Zillow is $1,206,740. It has increased slightly by 0.1% over the past year (as of July 31, 2026). Rent, according to Zumper, is $2,750 per month as of August 2026, while a two-bedroom is around $3,330.

Calculating the ratio based on overall rent gives about 37. This is higher than the levels seen in Long Beach or LA. A commonly used benchmark suggests that a ratio over 20 indicates that renting is relatively favorable, and Pasadena significantly exceeds that threshold.

When converted to monthly payments, the gap becomes even clearer. With a 20% down payment, a 30-year fixed mortgage, and applying the average interest rate of 6.65% from Freddie Mac as of August 20, 2026, the principal and interest alone would be around $6,198 per month. This is nearly double the rent of $3,330 for a two-bedroom.

For this couple, the ratio alone did not provide a clear conclusion. They needed to consider the opportunity cost of investing the lump sum for the down payment elsewhere and the portion of the principal in their monthly payments that builds equity.

Closing costs were also factored into the calculations. Typically, these range from 2% to 5% of the purchase price, which for Pasadena's median price translates to between $24,000 and $60,000. When combined with moving and baby supply costs, the initial burden is significant.

If approaching this as an investment, the total return should also be examined. This is the annual rent divided by the purchase price, and for Pasadena, it is relatively low at about 2.7%. If expecting capital gains from the investment, relying solely on rental income may not be very attractive.

Additionally, California's property tax structure was considered. Under Proposition 13, property tax assessments are based on the purchase price and only increase by about 2% annually thereafter. This structure tends to favor buying as the longer you live there, the lower your relative property tax burden remains.

The interest rate environment is also a variable. A change of just 1 percentage point can significantly alter monthly payments. If the interest rate at the time of purchase is lower than it is now, this calculation would need to be revisited.

The calculation the couple faced ultimately came down to this: even if they moved to a two-bedroom rental costing $3,330 per month, the principal and interest on a purchase would be $6,198. Depending on how much they have saved for a down payment, this gap could narrow, but in areas like Pasadena with a high ratio, the immediate monthly burden often widens significantly.

They also needed to consider their living plans. If their child is still young and they might move again in a few years, it seems more realistic to continue renting while saving for a down payment. Conversely, if they plan to settle in Pasadena for a long time and consider school districts, the situation could change.

Pasadena is a region with a high interest in school districts. While referencing ratings from GreatSchools or Niche, keep in mind that school boundaries change frequently, so it's advisable to check the assigned school for the specific address before purchasing.

Ultimately, whether to rent or buy is not a decision that can be made solely based on the current rent increase. It's necessary to consider plans for the next few years as well.

Since market prices and interest rates can vary based on loan conditions and timing, please use the figures in this article as a reference. This is not investment or legal advice, and it is recommended to consult with a professional before making any actual agreements.