Why Buying a Home Is a Better Investment Than Renting Today

Do you want to know if you should keep renting or purchase a house this year? Consider the following. Rental affordability remains a concern, as it has for many years. This is because rents have typically risen over time. Rents have been gradually rising since 1988, according to Census data.

And, data from the latest rental report from Realtor.com shows rents continue to grow today, even though it’s at a slower pace than we saw at the height of the pandemic:

“In March 2023, the U.S. rental market experienced single-digit growth for the eighth month in a row . . . The median asking rent was $1,732, up by $15 from last month and down by $32 from the peak but is still $354 (25.7%) higher than the same time in 2019 (pre-pandemic).”

Renting a property may be a better alternative now, with rents significantly higher than they were in more typical, pre-pandemic years, especially if the long-term pattern of rents increasing each year continues. A fixed-rate mortgage, on the other hand, allows homeowners to lock in a monthly mortgage payment for the life of their loan (usually 15-30 years).

Owning a Home Could Be More Affordable if You Need More Space

The graph below compares the two choices by using national data from Realtor.com on median rental payment and median mortgage payment from the National Association of Realtors (NAR). As the graph demonstrates, depending on how much space you want, it is usually more cost effective to purchase rather than rent if you require two or more bedrooms:

The graph below compares the two options using nationwide data from Realtor.com on median rental payments and nationwide Association of Realtors (NAR) median mortgage payments. As the graph shows, depending on how much space you need, buying rather than renting is typically more cost efficient if you need two or more bedrooms:

So, if you want to live somewhere with two or more bedrooms to accommodate your family, more breathing room to spread out your belongings, or extra space to practice your hobbies, homeownership may be worth considering.

Homeownership Allows You To Start Building Equity

In addition to protecting you from rising rents and making extra space more cheap when you need it, owning your house allows you to begin developing your own equity, which increases your net worth.

And, as home values rise over time and you pay off your mortgage, you accumulate equity.That equity can help you succeed later on because you can use it to fund a move to a larger space later on. That's why, according to Zonda, the number one reason millennial homeowners purchased a property in the last year was to grow their own equity rather than someone else's.

Bottom Line

If you’re trying to decide whether to buy a home or continue renting, work with a trusted real estate agent to explore your options. With rents rising, it may make more sense to pursue your dream of homeownership.