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For years, buying a home was considered the smarter financial move compared to renting. If you could scrape together a down payment, your monthly mortgage payment was often lower than what you’d pay in rent—and on top of that, you’d be building equity. But fast forward to today, and the story has changed drastically. In 2020, only 16% of Americans lived in places where renting was cheaper than buying. Now? According to The Economist, that number has skyrocketed to 89%.
What Happened?
Blame soaring home prices and interest rates. Over the past few years, house prices have surged by 40%, while mortgage rates have more than doubled—from 3.1% in 2020 to over 7% today. That means monthly mortgage payments have shot up by 50%, making homeownership far more expensive than it used to be. Meanwhile, rent prices have increased too, but only by about 20% in the same period.
Take a look at this map from The Economist, which shows how the affordability of renting vs. buying has changed between 2020 and 2023. 👇
The shift is massive. Just three years ago, homeownership was cheaper than renting in most of the country. Now, in almost every U.S. city, renting makes more financial sense. The few exceptions? Some parts of Baltimore, Philadelphia, and the Bronx in NYC still favor buyers—but not by much.
Will It Ever Be Cheaper to Buy Again?
If you’re waiting for the housing market to shift back in favor of buyers, don’t hold your breath. Experts predict that home prices will keep rising (though more slowly), and mortgage rates are expected to stay high. According to Goldman Sachs, home prices will likely increase by 1.9% in 2024 and 2.8% in 2025. Mortgage rates might dip slightly, but they’re still expected to stay above 6.5% for the foreseeable future.
For the market to shift back toward buyers, one of these three things would need to happen: ✔️ Home prices drop by 30% or more ✔️ Mortgage rates fall back to 3-4% ✔️ Rent prices spike by 50%
Right now, none of these seem likely. So unless you’re in a rare market where buying is still the better deal, renting may be the smarter move—for now.
Are you currently renting or looking to buy? Have you noticed these price trends in your area? Drop a comment below and let’s talk about it! 👇
