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In 2024, the monthly cost of renting is often lower than buying a comparable home in most major U.S. metros, even with a 20% down payment. However, buying a home becomes financially advantageous if you plan to stay for over five years, allowing you to build equity and stabilize your largest monthly expense. The right choice depends critically on your timeline, financial readiness, and lifestyle goals.
The financial landscape has shifted significantly since before the pandemic. While home prices and mortgage rates have climbed, rising rents have also made it harder to save for a down payment. Recent analysis shows that at the start of 2024, renting was cheaper than owning in 29 out of 50 major metropolitan areas. Furthermore, it now takes the average renter four years longer to save for a down payment than it did pre-pandemic. This means the monthly financial advantage often lies with renting, but that is only a short-term view.
For those who are financially prepared, buying a home offers several long-term advantages that renting cannot match.
1. How Does Building Equity Work? Building equity means increasing your financial stake in the home. This happens in two ways: by paying down your mortgage principal over time and if the home's value appreciates. Your equity is the difference between the home's market value and your remaining mortgage balance. For example, if you sell a home for $350,000 and owe $200,000, you have $150,000 in equity. Based on our experience assessment, if you plan to stay in a home past the breakeven point—which can be around five to six years in the current market—buying typically becomes the more financially sound decision.
2. Can a Mortgage Payment Act as Forced Savings? Yes. With each mortgage payment, a portion goes toward the loan's principal, directly increasing your ownership share. This acts as a form of forced savings, building wealth while providing shelter. This can be a simpler savings plan for those who may not consistently invest elsewhere.
3. How Does Homeownership Protect Against Inflation? A fixed-rate mortgage locks in your principal and interest payment for the life of the loan, offering a hedge against inflation. While property taxes and insurance may rise, your core housing cost remains stable. In contrast, rents have surged over 29% since 2020 and are likely to continue increasing over the long term.
4. What Are the Potential Tax Advantages? Homeowners who itemize deductions can write off mortgage interest on loans up to $750,000. Additionally, when you sell, you can exclude up to $500,000 in capital gains from taxes (or $250,000 for single filers), a significant benefit not available with other investments.
Renting remains a smart, flexible choice for many, particularly for those with shorter-term plans or budget constraints.
1. Is Renting More Affordable Month-to-Month? In most markets, the monthly cost of renting a comparable home is lower than owning when factoring in the mortgage, insurance, and taxes. This frees up capital that could be invested elsewhere, potentially yielding a higher return.
2. What Are the Lifestyle Advantages of Renting? Renting offers greater flexibility to move for a job or lifestyle change without the burden of selling a home. It also typically includes lower upfront costs and eliminates responsibility for expensive, unexpected maintenance repairs. Annual maintenance for homeowners averages approximately $6,413, according to data from the home management platform Thumbtack.
3. How Does Renting Reduce Financial Risk? Renters are insulated from the risk of a local housing market downturn. If home values decline, a homeowner could find themselves "upside down" (owing more on the mortgage than the home is worth), which can create complications if they need to sell.
To make the best choice for your situation, consider these steps:
The bottom line is deeply personal. There is no universally "right" time to buy. By carefully weighing your financial picture, timeline, and personal goals, you can confidently determine whether buying or renting is the right strategic move for you in 2024.
