Housing is typically the single largest expense in any budget. Whether to rent or buy depends heavily on where you live and how long you plan to stay.
The Rent vs. Buy Equation
The general rule is that buying makes sense if you plan to stay for 5+ years, but this varies enormously by market. In some cities, renting is almost always cheaper; in others, buying saves money almost immediately.
Markets Where Buying Wins
In affordable Midwest and Southern cities, monthly mortgage payments (with 20% down) are often less than rent. Cities like Detroit, Cleveland, and Memphis offer exceptional buy-to-rent ratios.
Markets Where Renting Wins
In expensive coastal markets like San Francisco, New York, and Los Angeles, the enormous down payment required and high monthly costs often make renting the smarter financial choice.
What About Investment Returns?
Real estate has historically appreciated at about 3-5% annually. However, when you factor in property taxes, maintenance, insurance, and opportunity cost, the picture becomes more nuanced.
Our Recommendation
Use the price-to-rent ratio as a starting point: if a home costs less than 15 times annual rent, buying is favored. Above 20 times, renting is usually better. Between 15-20, it depends on your specific situation.