For most Americans, the cost of buying a house has felt pretty prohibitive these past couple of years. Property prices haven’t recovered from the pandemic buying frenzy, and mortgage rates — which had been the more affordable part of the equation not that long ago — have shot back up toward 7%. Rents, on the other hand, are finally starting to ease. Thanks to a boom in new construction, the median asking rent on rental units (apartments and houses with up to 2 bedrooms) has dipped below $1,700 for the first time since April 2022 — falling to $1,695 last month, according to Realtor.com. This dip means the average monthly mortgage payment is roughly 35% higher than the typical apartment rent. And that affordability gap is driving a growing number of Americans to choose renting over buying, the latest research from the commercial real estate firm CBRE Group shows. For those struggling to afford either option, the decline in rents helps make a seemingly impossible housing choice more straightforward. But is it that simple? Here are a few other things to consider:

1.    Rents are still high. The median rent is still 16% higher than it was in 2019, and may easily eat up more than the recommended 30% of a renter’s income. By that rule of thumb, the typical apartment rent is “affordable” only for those who earn at least $63,680 a year, according to the real estate brokerage Redfin. And that’s almost $9,000 more than the national median income.

2.    What most rent-versus-buy calculations miss is that homeownership is an investment that can yield thousands of dollars in equity each year. The typical home sale generated $122,500 in profit for sellers in 2024, a roughly 54% return on their investment, according to real estate analytics firm ATTOM.

3.    If you can afford to buy, it’s important to consider how long you would stay in your home, because many experts say it takes at least five years to build significant equity in your home. And in the meantime, you’ll be on the hook for everything else that comes with homeownership — including home insurance, property taxes, and energy bills, all of which are more expensive than they were a few years ago. In 2024, non-mortgage expenses on a typical single-family home cost more than $18,000, adding over $1,500 to monthly costs, Bankrate estimated. So what? Your choice of housing is about cost, but also about lifestyle choices and where you see yourself in five to ten years. Renting is expected to be the more affordable option for most Americans this year, and has the added benefit of being more flexible if you think your circumstances may change. But if you can handle all the costs of owning a property, a purchase gives you the chance to build wealth long-term.

Related Reading

•   Is It Better To Rent or Buy Going Into the New Year? Easy Formula Breaks It Down (ABC News)

•   The Top 20 Markets Where It’s Cheaper To Rent Than Own a Single-Family Starter Home (Realtor.com)

•   The Decline in Relative Housing Affordability and the Impact on Homebuyer Search Behavior (Freddie Mac)

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photo credit: iStock/Alex Potemkin

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