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📂 Category: Renting,Home Ownership,Personal Finance
📌 Main takeaway:
Key takeaways
- If your rent increases, you may think that buying is a way to save, but interest rates and housing costs are deciding factors.
- Staying in one place for at least five to seven years often makes home ownership more advantageous.
- If both renting and buying are unaffordable, strategies such as co-living, moving, or negotiating your salary can help.
With average rental prices rising nearly 28% over the past five years, many renters across the country are wondering if homeownership is the smarter financial move.
The answer isn’t entirely clear, according to Kirk Regan, owner of High Flight Financial.
“There are too many factors for the golden rule,” he said.
To help clients sort through the numbers, Regan identifies the break-even point in the purchase versus lease debate. Ultimately, rates and interest rates are the biggest factors, but Reagan also takes into account the down payment, property taxes, insurance, and other costs like maintenance. Of course, you should also consider how long you plan to stay and other lifestyle options.
Renting vs. buying: Here’s what the numbers say
One quick rule of thumb is the price-to-rent ratio, according to Sarah Mitter, founder of Camriel Advisors. This ratio is the purchase price of the home divided by the annual rent you pay.
“If the cost of the home is less than about 20 times the annual rent, then purchasing may make sense,” she said.
By these calculations, if you’re paying $2,000 a month in rent — or $24,000 a year — buying a similar home for more than $480,000 may not be a smart move. However, Mitter warns that homeownership comes with many additional costs — and interest rates, in particular, can make a big difference.
The Reagan calculator helps illustrate how these costs affect the outcome. When you take into account the 6.00% mortgage rate, property taxes, insurance, and maintenance, it makes sense to rent for $2,000 a month ($24,000 a year) unless you can find a similar home for closer to $335,000 — that is, a price-to-rent ratio of about 14. These differences show why it’s important to treat the general rules as starting points, not final answers.
Average price to rent ratio
The average price-to-rent ratio in the United States will be about 14.3 in 2024, according to an analysis by Clever Real Estate.
Another very important factor is how long you plan to stay in your home. In general, the longer you plan to stay in your home, the more sense the purchase will make. In his calculator, Regan emphasizes the “break-even point,” or how long it takes before the benefits of homeownership outweigh the savings from renting.
For a $325,000 home with a 6.50% LTV, the break-even point is about 14 years, assuming a 20% down payment and a similar rental home at $2,000 per month. Again, these numbers are very sensitive to variable costs. For example, if all other things were equal but interest rates fell to 4.00%, the break-even point would shrink to just over three years.
Average rent versus average house price
The average rent across all home types in the United States was $2,000 per month as of November 2025, while the average home price in October 2025 was $440,387.
If these are your options, Reagan’s calculator suggests you’re better off renting. This assumes a 6.00% interest rate, a 30-year fixed mortgage, a 7% rate of return on a 20% down payment and the additional monthly costs you save, among other factors. Although renters are not building equity in the home, they are able to build savings by investing the down payment and the difference between their monthly rent and their mortgage payment.
After five years, renters will receive a 20% down payment plus a savings of $112 per month, up to $94,798. If renters invested the down payment and then the additional $112 per month in an index fund that returned a 7% annual rate of return, they would have more than $132,000 after five years. After 10 years of this investment strategy, they will have more than $193,000.
| Rent versus buy | ||
|---|---|---|
| comparison | rent | He buys |
| Initial payment | $0 | $88,078 |
| Monthly costs | $2000 | $2,112 |
| Costs after 5 years | $120,000 | $214,798 |
Beyond mathematics: lifestyle and stability
For many, the real question is less about spreadsheets and more about life plans.
“The biggest factor is how sure you are that you’re going to stay home,” Regan said.
If you expect to move within a few years, renting may still be the best option. Owning also requires maintenance.
“Are you going to add value or take away value? Are you OK with doing all the maintenance yourself or paying for it?” He said.
Mitter echoes this point. Renting offers flexibility if you want to move for business or adventure, while buying is best if you want the stability of putting down roots and customizing your forever home. It also emphasizes the need for saving.
“Homeownership means you’re the one paying to fix the heat pump that breaks during a huge snowstorm,” she said.
Sam Mockford, an advisor at Citrine Capital, lists additional preparedness factors: saving enough for a down payment plus closing costs, making sure your monthly mortgage payments fit the budget, and a desire to stick around for five to 10 years. She added that a suitable lifestyle is also important, as are mobility, social life and local culture.
Options available when renting and purchasing are out of reach
For those who feel like they’re priced out of both options, there are still ways to ease the pressure.
Sharing a two-bedroom apartment with a roommate is much cheaper than renting a one-bedroom apartment yourself.
“Instead, find a friend and invest your savings,” Reagan said.
According to the U.S. Census Bureau, the average rent for a one-bedroom apartment in the United States is $1,301, compared to $1,490 for a two-bedroom apartment. This means that two friends sharing a two-bedroom apartment could pay about $745 per month each, roughly 43% less than what they each spend on a one-bedroom. Over the course of a year, that could translate into a savings of nearly $7,000.
If you’re not quite ready to have a roommate, Mitter recommends expanding your search area.
“Your money can go much further by looking outside of major cities where commutes are reasonable but housing is less expensive,” she said.
- Mockford offers a wide range of strategies:
- Consider working remotely to move to a cheaper area
- Negotiate higher wages using cost of living data
- Supplement income with side hustles like Uber or DoorDash
- Cutting expenses or even subletting a room can provide breathing room while saving for long-term goals
Bottom line
When the rental price increases, it can make purchasing look more attractive, but the decision depends on more than monthly costs. Interest rates, time horizon, and lifestyle priorities all determine whether ownership makes sense. A fixed mortgage can sometimes beat a rising rent, but only if the numbers and life stage are compatible. For those stuck in the middle, creative strategies to lower housing costs and boost savings can keep long-term stability within reach.
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