Buying vs. Renting

While renting can be a solid choice while saving for a down payment, recent findings show that homeownership is still the better deal. The cost of renting is rising faster than any other time in the last six years, according to the Bureau of Labor Statistics, while rental inventory stands at a 20-year low.

While rising rents and lack of inventory might nudge renters into buying a home, National Association of Realtors® Chief Economist Lawrence Yun points out that tight credit standards, student debt, and the growth of multigenerational households are contributing to the lowest number of first-time home buyers in decades (as shown in the 2014 NAR Profile of Home Buyers and Sellers). Additionally, rising rents mean less money to put away for that down payment. Even with these difficulties, Yun projects first-time home buyers will be more active in the 2015 housing market, freeing up some of that rental inventory.

Is it better to buy or rent?

Whether renting is better than buying depends on many factors. NAR members help their clients answer this question with statistics and studies on home owners and renters as well as financing options and tips. 

Source: Ginnie Mae

The chart shows a cost comparison for a renter and a homeowner over a 7 year period. The renter starts out paying $800 per month with annual increases of 5% The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.