The new math of renting vs. buying

By : J. David Chapman/May 8, 2025

For years, the rent-versus-buy debate followed a fairly simple formula. If you planned to stay in a home for five years or more, had decent credit, and could afford a down payment, buying almost always made financial sense. But in today’s housing market, that math has changed—and so have the assumptions behind it.

With mortgage rates hovering around 7% and home prices still elevated, even modest homes now come with monthly payments that can shock the system. Add in rising property taxes, homeowners insurance, and maintenance costs, and the true cost of ownership begins to look more like a luxury than a financial milestone.

Let’s do a quick comparison: A $275,000 home with 10% down at a 7% interest rate comes with a monthly mortgage of around $1,900—before taxes, insurance, and repairs. Add those in, and you’re closer to $2,400 or more per month. Meanwhile, the same household might rent a similar property for $1,800 with no maintenance burden and less upfront cash.

That’s why many would-be buyers—especially younger professionals and first-timers—are choosing to rent longer. It’s not because they don’t value homeownership; it’s because the upfront costs, long-term commitments, and monthly financial strain feel out of sync with today’s economic realities.

Of course, renting isn’t immune to market pressures either. Rents have surged over the last few years, and vacancy rates remain low in many metros. But renters retain flexibility. They can relocate without listing a home, avoid large repair bills, and redirect savings toward retirement, travel, or other investments.

Still, there are long-term trade-offs. Renters don’t build equity or benefit from appreciation. Inflation eats away at savings while home prices (eventually) climb. Homeownership remains a powerful wealth-building tool—but it’s no longer the obvious choice it once was.

The bigger issue may be this: the traditional rent-versus-buy calculators assume a stable market, predictable interest rates, and steady job growth. Today’s environment is anything but predictable. For many households, the right decision isn’t just financial—it’s deeply personal.

As affordability challenges mount, more people are reevaluating what “home” really means and what they’re willing to pay for it.

The old formula said: “If you can, you should buy.” The new one says: “Run the numbers, consider your circumstances, and then run them again.”

J. David Chapman, Ph.D., is professor of finance & real estate at The University of Central Oklahoma (jchapman7@uco.edu).