Is it cheaper for me to rent or buy in today’s market?

“Is it cheaper for me to buy or rent?” That’s the question almost every first-time buyer asks. The answer to this question depends upon your own unique set of circumstances. Here’s how to tell.

When renting may be a better choice than buying

If you’re a renter who doesn’t want to be tied to living in one place for an extended period, who doesn’t want the hassle and the expense of maintaining a property, or who is currently living in a rent-controlled unit where rent increases are tightly controlled, you are probably better off renting.

If you would like to stay in the same location, if you want to put down roots in your local community, and you who have the financial resources to purchase and maintain a home, you’re a good candidate to become a buyer (For a more detailed discussion, visit, FirstRepublic.com.)

Homeownership builds wealth—renting zaps it

The graph below from  Keeping Current Matters is based on statistics from the Federal Reserve. It clearly illustrates that if you can purchase a home, you should do so, especially in terms of creating intergenerational wealth.

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Do you need help with your down payment?

First, the bulk of the American public believes they must put 20 percent down to purchase a home. The truth of the matter is that there are a wide variety of special loans that will let you purchase with as little as 3.5 percent down.

In addition to being able to purchase using a low down payment, a large percentage of buyers qualify for down payment assistance. In the fact, the average amount of down payment assistance paid in 2022 through the resources available at DownPaymentResource.com (DPR) was $17,000!

To quickly determine whether down payment assistance is available for a specific listing, visit Zillow and click through the mortgage tabs to “down payment assistance.” Zillow has partnered with DPR to display all the down payment programs available for all listings posted on Zillow.

Is it better for me to rent or buy?

The best way to answer is to compare the cost of renting vs. purchasing over a specific time period. Based upon each buyer’s unique circumstances., NerdWallet has a rent vs. buy calculator that allows you to show your buyer exactly where the breakeven point is between renting and buying.

Your buyer is purchasing a median priced home priced at $428,700 with 20 percent down and obtaining a 30-year fixed rate loan of $343,000 (80 percent) at 5.88 percent interest.

The buyer currently lives in a median-priced 2-bedroom, 2-bath apartment in Atlanta that rents for $2,431. (Search ApartmentList.com to see the cost-of-living numbers and median rents for your location.)

The two screen captures below display the results from the t NerdWallet rent vs. buy calculator. The first scenario shows the point where it is cheaper for the buyer to purchase as opposed to renting. That takes place at approximately three years as you can see in the chart below.

The second scenario shows that at 10 years, the buyer is saving $870 per month and $104,409 in total by owning rather than renting.

Below is a summary of the amounts saved at various points in this loan. It’s easy to see why the data from the Federal Reserve shows that homeowners have 40 times the net worth of renters.

The beauty of using the NerdWallet rent vs. buy calculator is that both buyers and agents can quickly access this information. Simply enter in the price the buyers want to pay, the location, the amount of the down payment, the loan details as indicated above, and the buyer’s current rent.

While it may take a few minutes to fill out the data required to generate the charts above, there is not another approach that I’m aware of that is more powerful way for any potential buyer to determine whether “It’s cheaper for me to rent.”