First-Time Buyers
Is It Better To Rent or Buy a Home?
You’ve probably asked yourself lately: Is it even worth trying to buy a home right now?
With high home prices and stubborn mortgage rates, renting can seem like the safer choice right now. Or maybe your only choice. That’s a very real feeling. And perhaps buying today isn’t your best move; it’s not for everyone right away. You should only buy a home when you’re ready and able to do it, and if the timing is right for you.
But here’s the thing you need to know about renting.
While it may feel like a safer bet today – and in some areas might even be less expensive month-to-month than owning – it can really cost you more over time.
In fact, a recent Bank of America survey found that 70% of aspiring homeowners worry about what long-term renting means for their future. And they’re not wrong.
Owning a home may seem way out of reach, but if you make a plan now and steadily work toward it, homeownership comes with serious long-term financial benefits.
Homeownership Builds Wealth Over Time
Buying a home isn’t just about having a place to live – it’s a step toward building your future wealth.
Why? Home prices typically rise over time, which means the longer you wait, the more expensive it is to buy. And even in some markets where home prices are softening today, the overall long-term trend speaks for itself (see graph below):
And as home values rise, so does your equity when you’re a homeowner. That’s the difference between what your home is worth and what you owe. So, with every mortgage payment, that equity grows. Over time, that becomes part of your net worth.
Today, the average homeowner’s net worth is nearly 40X greater than that of a renter. That’s a shocking difference, and the dollars in the visual below don’t lie (see graph below):
And it’s one of the big reasons why Forbes says:
“While renting might seem like [the] less stressful option . . . owning a home is still a cornerstone of the American dream and a proven strategy for building long-term wealth.”
The Biggest Downside of Renting
So, short-term, why does renting feel like a simpler choice? Lower monthly payments, less responsibility, no strings attached. But long-term? It can sting.
For decades, while home prices have been rising, rent has gone up too. And while rent has held rather steady more recently, history shows the overall trend is up and to the right. That makes saving for a home more complicated than ever (see graph below):
That kind of financial uncertainty has a real impact. In the same Bank of America survey, 72% of potential buyers said they worry rising rent could affect their current and long-term finances.
Because rent doesn’t build wealth. It doesn’t come back to you later. It pays your landlord’s mortgage – not yours.
So, whether you rent or own, you’re paying a mortgage. The question is: whose mortgage do you want to pay?
Renting vs. Buying: What Really Matters
Think of it this way. Renting means your money is gone once you pay it. Owning means your payment builds equity – like a savings account you can live in. Sure, buying comes with responsibility. But it also comes with the kind of reward that grows over time. And that’s why you need a solid plan to get there.
As Joel Berner, Senior Economist at Realtor.com, explains:
“Households working on their budget will find it much easier to continue to rent than to go through the expenses of homeownership. However, they need to consider the equity and generational wealth they can build up by owning a home that they can’t by renting it. In the long run, buying a home may be a better investment even if the short-run costs seem prohibitive.”
Bottom Line
Renting may feel more do-able today. But over time, it could cost you more – without helping you build anything for your future.
If homeownership feels out of reach today, you’re not alone. And the first step toward getting out of the rental trap is to set a plan. Connect with an agent to set your specific goals and explore your options – so you’re ready when the time is right.
A recent survey from Bank of America asked would-be homebuyers what would help them feel better about making a move, and it’s no surprise the answers have a clear theme. They want affordability to improve, specifically prices and rates (see below):
Here’s the good news. While the broader economy may still feel uncertain, there are signs the housing market is showing some changes in both of those areas. Let’s break it down so you know what you’re working with.
Prices Are Moderating
Over the past few years, home prices climbed fast, sometimes so fast it left many buyers feeling shut out. But today, that pace has slowed down. For comparison, from 2020 to 2021, prices rose by 20% in a 12-month period. Now? Nationally, experts are projecting single-digit increases this year – a much more normal pace.
That’s a sharp contrast to the rapid growth we saw just a few short years ago. Just remember, price trends are going to vary by area. In some markets, prices will continue to rise while others will experience slight declines.
Prices aren’t crashing, but they are moderating. For buyers, the slowdown makes buying a home a bit less intimidating. It’s easier to plan your budget when home values are moving at a much slower pace.
Mortgage Rates Are Easing
At the same time, rates have come down from their recent highs. And that’s taken some pressure off would-be homebuyers. As Lisa Sturtevant, Chief Economist at Bright MLS, says:
“Slower price growth coupled with a slight drop in mortgage rates will improve affordability and create a window for some buyers to get into the market.”
Even a small drop in mortgage rates can mean a big difference in what you pay each month in your future mortgage payment. Just remember, while rates have come down a bit lately, they’re going to experience some volatility. So don’t get too caught up in the ups and downs.
The overall trend in the year ahead is that rates are expected to stay in the low to mid-6s – which is a lot better than where they were just a few short months ago. They may even drop further, depending on where the economy goes from here.
Why This Matters
Confidence in the economy may be low, but the housing market is showing signs of adjustment. Prices are moderating, and rates have come down from their highs.
For you, that may not solve affordability challenges altogether, but it does mean conditions look a little different than they did earlier this year. And those shifts could help you re-engage as we move into next year.
Bottom Line
Both of the top concerns for buyers are seeing some movement. Prices are moderating. Rates are easing. And both trends could stick around going into 2026.
If you’re considering a move, connect with a local real estate agent to walk you through what’s happening in your area – and what it means for your plans.
If you’re planning to buy a home this year, there’s one expense you can’t afford to overlook: closing costs.
Almost every buyer knows they exist, but not that many know exactly what they cover, or how different they can be based on where you’re buying. So, let’s break them down.
What Are Closing Costs?
Your closing costs are the additional fees and payments you make when finalizing your home purchase. Every buyer has them. According to Freddie Mac, they typically include things like homeowner insurance and title insurance, as well as various fees for your:
- Loan application
- Credit report
- Loan origination
- Home appraisal
- Home inspection
- Property survey
- Attorney
National vs. Local: Why the Numbers Look So Different
When you search for information about closing costs online, you’ll often see a national range, usually 2% to 5% of the home’s purchase price. While that’s a useful starting point if you’re working on your homebuying budget, it doesn’t tell the whole story. In reality, your closing costs will also vary based on:
- Taxes and fees where you live (like transfer taxes and recording fees)
- Service costs for things like title and attorney work in your local area
While the home price is obviously going to matter, state laws, tax rates, and even the going costs for title and attorney services can change what you expect to pay. That’s why it’s important to talk to the pros ahead of time so you know what to budget for. It can put you in control before you even start shopping.
To give you a rough ballpark, here’s a state-by-state look at typical closing costs right now based on those factors for the median-priced home in each state (see map below):
As the map shows, in some states, typical closing costs are just roughly $1-3K. In a few places, they can be closer to $10-15K. That’s a big swing, especially if you’re buying your first home. And that’s why knowing what to expect matters.
If you want a real number to help with your budget, your best bet is to talk to a local agent and a lender. They can run the math for your price range, loan type, and exact location.
And just in case you’re looking at your state’s number and wondering if there’s any way to trim that bill, NerdWallet shares a few strategies that can help:
- Negotiate with the seller. Ask for concessions like a credit toward your closing costs.
- Shop around for homeowner’s insurance. Compare coverage and rates before you commit.
- Check for assistance programs. Some states, professions, and neighborhoods offer help. Your agent and lender can point you to what’s available locally.
Bottom Line
Closing costs are a key part of buying a home, but they can vary more than most people realize. Knowing your numbers (and how to potentially bring them down) can go a long way and help you feel confident about your purchase.
Connect with a local agent or lender to take a look at typical closing costs in your area and get your personalized estimate, so you can craft your ideal budget.
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