On paper, it often seems that owning a home is more expensive than renting. On average, it's about 14% more when factoring in expenses like insurance, taxes, and upkeep. However, in recent years, this difference has grown significantly. Just about all homeownership costs have ballooned, and the premium for homeownership is now at least 35% over renting in some cases. This is near historical highs and is likely to persist.

Research Insights

Rick Palacios Jr., director of research at John Burns Research and Consulting, points out that factors like rising homeowners insurance premiums explain much of the growing gap. Higher mortgage rates also don't help. Leaving other factors constant, mortgage rates would need to be at 3.5% for the buying versus renting math to return to historical averages.Commercial real estate investment firm CBRE pegs the premium to buy versus own at about 35% earlier this year. Their measure includes the cost of mortgage insurance but doesn't factor in expenses like homeowners insurance or upkeep. Travis Deese, associate director for multifamily research at CBRE, says their presented approach is very conservative and the actual premium is likely higher.If mortgage rates slowly drop and rents creep up next year, the differential might get a bit less extreme. But stubbornly high home prices will prevent the premium from moving too much. The company expects the premium to end 2025 at around 25%.

Personal Finance Debate

Buying versus renting is a fierce debate in personal finance circles. Buyers emphasize building equity and shielding themselves from rent increases. Renters tout their maintenance-free lifestyles and the ease of moving. The choice is personal, and buying remains the long-term goal for most Americans.While home ownership costs have continued to rise, renters have recently gotten a break. Rents are still higher than pre-pandemic levels, but aggressive apartment construction has helped minimize further increases. Nationwide, median rents rose just 0.2% in October from a year earlier.

Individual Experiences

Brooke Merino, 26, works in sales and helps renters in Denver. She recently bought a house in Englewood for $525,000 and her mortgage payment will be about $3,500 a month, while her rental costs just over $2,500 a month for rent and utilities. She feels she got a deal as the home had price reductions and she locked in a sub-6% mortgage rate.Savannah West, 28, renovated a fixer-upper in Douglasville but found it too costly. She now rents a loft in the city and takes her daughter to nearby activities. While renting suits her now, she's considering buying a condo in the future.Real estate agent Iain Phillips generally advocates for buying but understands when clients choose to rent, especially in expensive areas like Orange County. He advises potential buyers to be comfortable with their monthly payment and plan to stay in their homes for at least five years.

Market Outlook

Fannie Mae's survey found that a record high 36% of consumers say their next move will be to rent rather than buy. Average mortgage rates are around 7%, a bit lower than a year ago, but median home prices are stuck close to all-time highs. Matt Vance, Americas head of multifamily research at CBRE, expects very little change in home prices, rents, and mortgage rates in the one-year outlook.In conclusion, the homeownership vs. renting debate continues, with various factors influencing the decision. Each option has its pros and cons, and individuals must weigh their financial situations and goals when making a choice.