The Pros and Cons of Renting vs. Buying a House (2024)

The question of “should you buy or rent” is a lot tougher to answer now than it was only four years ago. U.S. home prices have climbed along with interest rates, while rising rents have made it harder for many renters to save for a down payment.

Those dynamics have changed some of the ways you may be thinking about buying versus renting.

Before the pandemic, the decision usually came down to whether you could afford a down payment since mortgage payments on a typical home — even including taxes and insurance — were hundreds of dollars cheaper than rents.

Now, rents and mortgage payments are much closer. Even when putting 20% down on a home purchase, rents were cheaper than mortgages in nearly three out of five (29/50) major metros at the start of 2024. And it takes a renter four more years to save for a down payment now than it did pre-pandemic.

So on a monthly basis, you’re likely to pay less to rent in most metro areas — even for a comparable home. But that’s only part of the picture.

There are benefits to either option, and everyone will come to their decision with different priorities and values. It all depends on what you expect from the market, whether you see your home primarily as an investment, the length of time you expect to live in your home, and the lifestyle you’re seeking.

Here are some pros to each option to help you weigh your choices.

Pros to buying a home now

Even in today’s housing market, buying a home could be a smart move. Here are six reasons why buying a house could benefit you more than renting:

You may be able to build equity

“Building equity” means that you increase your financial stake in the home over time. You can do that in two ways: 1) By paying down your mortgage over time, and 2) by buying a home that eventually becomes worth more than you bought it for.

The difference between what you can sell your home for and what you owe on your mortgage is your equity. So if you could sell your home for $350,000 and you owe $200,000 on your mortgage, you would have $150,000 in home equity, including the amount you put toward the down payment.

While there are no guarantees that any given home will appreciate in value, homes typically tend to become more valuable over time. What makes ownership especially attractive in those cases is that you earn appreciation on the entire value of the home, not just the amount you put down toward the purchase.

Affordability Calculator

What’s changed for buyers over the past few years is the amount of time they would have to live in their homes before equity growth helps buying become ultimately cheaper than renting.

For example, if you bought a $350,000 home with 20% down, and home values really struggled to take off this year, you would have to live in that home for around seven years before the net cost of buying and maintaining the home equaled the net cost of renting during that same period. If mortgage rates fall more and home values start growing again, you could break even in a little over four years.

Both examples assume you’d be paying $2,000 a month in rent and earning a 6% return by investing the money you would otherwise have put toward the down payment. (“Net costs” means the usual costs, but offset by the homeowner’s growing equity or the renter’s investment account balance.)

Every mortgage payment can help you save

When you pay your mortgage each month, some of it goes toward interest on the loan and some goes toward principal or paying down the amount you owe. Over time, the share that goes toward principal gets larger and larger, increasing your share of ownership in the home as time passes.

Those principal payments are considered “forced savings,’’ since they build equity while you’re putting a roof over your head — something you’d have to pay for anyway.

“If you don’t think you’ll be reliably investing in the stock market and making a decent return on it, paying a mortgage can simplify your savings plan,’’ says Olsen.

You’re buying a lifestyle that could be hard to replicate if you’re renting

Buying a home can give you access to a larger variety of neighborhoods, home styles and amenities, and allow you to tailor your home to your liking, whether it’s through home improvements or landscaping.If you’ve ever searched for a single family rental, you know they can be hard to come by in your chosen neighborhood.

The higher demand for single family rentals translates to higher rents for those properties. Rent growth for single-family homes has been stronger than for multi-family homes, a trend that’s likely to continue according to Zillow’s 2024 housing predictions. Single-family rentals are 4.8% more expensive than a year earlier, while rents for multi-family are up 2.55% year over year.

“It’s important to remember: we find intrinsic value in ownership itself — in controlling the path of our lives and writing our own stories,’’ says Olsen. “Buying is a part of that.”

Your mortgage payments will remain relatively stable for as long as you own your home

A fixed-rate mortgage has a monthly payment that stays the same for the life of the loan. Taxes and homeowners insurance, which your lender will typically collect every month, are likely to increase, but the mortgage portion would remain unchanged until you sell or pay off the mortgage.

For that reason, real estate is often considered a hedge against inflation because it offers people a way to lock in the cost of shelter, which is a major part of their monthly budget.

You could get tax benefits

Homeowners who itemize deductions on their tax returns can write off the interest they pay on mortgages of up to $750,000. Owning a home may entitle you to other tax breaks as well.

Even more impactful to the bottom line, homeowners benefit when they sell, too: A married couple can avoid paying taxes on up to $500,000 in capital gains when they sell their home, a tax break that is not possible when you sell stocks or other capital investments. The capital gains deduction for a single homeowner is up to $250,000.

You may not have to make a fast decision

Depending on your market, your price tier and the season, you could have more time to look for what you want.

After one of the most challenging years on record for buyers in 2023, sellers are cutting prices and homes are taking slightly longer to sell. Zillow® research shows that 22.6% of for-sale listings had price cuts in November, and homes that sold that month went under contract in only 21 days. That’s a day faster than a year earlier, but more than two weeks faster than homes normally sold for in the fall pre-pandemic.

You may be able to use your home to earn rental income.

If you buy a home and later decide to move out or you have a spare room or accessory dwelling unit, you may be able to rent to someone else and use the rental income you receive to help you cover your mortgage payment and other costs.

“My advice to a first-time buyer is always that your first home is not your forever home,” Becky Garcia, team lead of The Garcia Group at eXp Realty in Phoenix, says, adding that potential buyers should look at their first purchase as a three-to-five-year home that will help build a down payment towards a dream home. “I tell them to look at it as a strategy,” she added. “My favorite purchase for a first time buyer is a duplex. They can live in one unit, rent out the other and have their tenant pay a large portion of their mortgage.”

It’s also possible to buy a home or vacation getaway and use it primarily as an investment property before you buy a principal residence for yourself.

The Pros and Cons of Renting vs. Buying a House (1)

Reasons you may consider renting for now

With all the reasons why you should consider buying a home, there are also some good reasons to keep renting. Here are six pros to renting a home vs buying that may be concerns for you:

The cost of renting is generally less expensive than buying the same quality of home

Rent is less expensive than a mortgage on a monthly basis in most places, even when comparing similar homes, according to Olsen.

The typical U.S. home in November 2023 was worth $347,415, and the typical mortgage payment for a buyer who put 20% down was $1,925. That amount was 9% higher than the previous November.

The typical U.S. rent in November 2023 was $1,982 — an increase of 3.3% from a year earlier, according to the Zillow Observed Rent Index (ZORI), but the trend shows rents flattening as more multi-family homes come on the market.

Zillow’s rent vs. buy calculator can help you estimate how many years it would take for your hypothetical cost of buying to equal your hypothetical cost of renting in your market. Generally, the longer you stay in your home, the more the balance swings toward owning.

Renters usually have more freedom to move

Renting comes with fewer strings attached. Whether it’s a different neighborhood or unit, you can usually move more easily to adapt your current lifestyle and needs, or to try out a different city altogether.

There’s usually no or low maintenance costs

“Homeownership can come with unexpected headaches — and sometimes expensive ones,’’ says Olsen. “Renters do not need to worry about the cost of maintenance or upgrades (outside of those built into next year’s lease), and in many cases don’t even need to mow the lawn.”

Data based on millions of home projects completed across the country show that home maintenance and upkeep runs about $6,413 annually, according to Thumbtack, a home management platform that enables people to fix, maintain and improve their homes.

You may need to make fewer financial compromises

Coming up with a down payment to buy a home requires building up significant savings, and higher home prices and interest rates have made home buying an expensive proposition that can require financial sacrifices.

Buying could require you to make sacrifices that you aren’t ready or able to make, such as settling for one less bedroom when you’re expecting a new member of your family or cutting back on entertainment or vacations.

The upfront costs are likely to be lower

“There is a low, but not zero, financial barrier to entry for renting,’’ says Olsen, so you can invest what you would have spent on a down payment into the stock market or other type of investment.

You won’t have to worry about home values declining

Homes generally appreciate over time, but they can also lose value. Nationally, home values are expected to flatten this year, but in some markets home values dropped.

While this can be good news for affordability if you’re planning to buy right now, the flip side is that you’ll need to consider likely home value trends over the course of ownership.

For example, if home prices take a dip, and you made a small or zero down payment and haven't owned your home long enough to build much equity, this could cause you to be underwater or “upside down” if you need to sell. While there are options for underwater borrowers, this could be a reason to keep renting for now and save for a higher down payment.

The Pros and Cons of Renting vs. Buying a House (2)

You don't have to pay property tax and other costs

Aside from maintenance, other costs of ownership include property tax, homeowners insurance, and sometimes homeowner association fees.

Olsen says the financial decision to rent or buy is based on a long timeline, and is anchored on someone’s expectations. Depending on future home value appreciation and how effectively you invest savings if choosing to rent, you could break even from buying in as few as five years or as many as 18 or more. Where a household falls within that range depends on the cost of the home they’re considering purchasing or renting, how quickly rents and home values grow, the potential rate of return on stocks or other investments and whether mortgage rates fall enough to make refinancing a good option.

If you’re curious about how much rent you can afford, check out this rent affordability calculator. And this calculator can show you how much you can afford to spend on a home, given your income, assets and debts.

Keep in mind that most experts say that shelter is considered affordable if the monthly outlay doesn’t consume more than 30% of your monthly income.

The bottom line: Deciding when to buy a home is a personal choice. There's no one "right" time for everyone. Only you can decide if now is the right time for you.