Is it better to rent or buy a house?

The current housing market presents considerable challenges for potential homebuyers. Higher housing costs, rising mortgage rates, and limited inventory in recent years have made it more difficult to afford a home. According to data from the U.S. Census Bureau, in the second quarter of 2024, 58.8% of occupied housing units in the U.S. belonged to homeowners, while 30.8% were occupied by renters. Still, high rental costs have made it more difficult for renters to save toward a home purchase.

Choosing whether to rent or buy a house is a difficult decision. Cost, location, employment, age, life stage, financial situation, and lifestyle preferences all play a role in determining the best option. Before you decide whether to buy or rent, learn more about the long-term considerations, financial impacts, and pros and cons of each. 

What are the pros and cons of renting a house?

Renting a house offers more flexibility with fewer responsibilities. However, it also comes with limitations and potential long-term financial drawbacks:

What are the pros and cons of buying a house?

When you buy a house, you gain a sense of ownership and stability. You also make a larger financial commitment and have more responsibility as a homeowner. Here are some benefits and drawbacks to consider before you buy:

How do financial considerations influence the decision to rent or buy?

Unlike renting, buying a house is a significant financial commitment initially, with upfront costs such as a down payment and closing costs. Your overall financial readiness is made up of the following factors:

• Current and future income
• Savings
• Debt-to-income ratio
• Credit score
• Credit history

Lenders consider your credit score, income, and other factors to determine eligibility for a home mortgage and set interest rates. Having a higher income, significant savings, and a strong credit profile can improve your odds for a lower rate and make buying a more feasible option. 

What are the long-term implications of renting vs. buying?

Renting and homebuying have short-term and long-term implications. If you're considering homeownership, it's important to recognize how your decision can impact your financial future and lifestyle:

• Equity: With homeownership comes the opportunity to build equity over time. As you pay down your mortgage, the portion of the home you own increases. Equity can be a significant financial asset. It can help you build wealth and provide a financial safety net and retirement security. It can also help you access cash through home equity loans or lines of credit for other financial needs, such as home improvement projects, education, or investment opportunities. 
• Stability: Owning a home can provide a sense of security and permanence. You can establish roots within your community and plan for the future. In contrast, renting is more about flexibility than stability. 
• Flexibility: As a renter, you have the flexibility to make housing changes or move locations when your lease is up. However, this flexibility can also lead to unwelcome changes, like rent increases, changes in lease terms, or even the need to move if your landlord decides not to renew your lease or sell the property. 
• Ongoing costs: Landlords generally bear the burden of costs like maintenance and repairs to the rental, property taxes, and other fees. These costs can be at least partially factored into monthly rent payments, but it's impossible to estimate how much they will be. Owning a home means you are responsible for maintenance issues, upgrades, or additions. 

Renting generally requires less financial commitment than homeownership, making it an attractive short-term option. You may have moderate costs upfront, such as a deposit or the first and last month's rent if the landlord requires it. It can take time to save up for a house, especially making a down payment and paying closing costs. 

How does the housing market impact the decision to rent or buy?

The housing market can impact the affordability and availability of housing. If there are no homes that fit your needs for sale in the area you want to buy — or none in your price range — you might be required to wait until the market changes. 

In a strong housing market with rising property values, buying a home can be an incredible investment opportunity. Property values increase over time and provide opportunities for financial gains. If the housing market is volatile or in decline, homebuying can become a riskier option. If the property value decreases, your home could be worth less than your remaining mortgage cost. 

Supply and demand can factor heavily into choosing whether to rent or buy. When there's high demand and limited housing inventory, home prices can skyrocket, making it difficult for potential buyers to afford housing. When the market is flooded with homes for sale, it becomes a buyers' market. The chances of finding better deals and more favorable terms and conditions increase. 

Interest rates can also impact your housing decision. Low mortgage rates can make buying more affordable. Lower interest rates can reduce monthly payments and the amount of interest you'll pay over the life of your mortgage. When rates are high, the cost of borrowing increases. This can make buying a less attractive option or even prevent you from buying a house in some cases.

Is it better to rent or buy a house? FAQs

What factors should I consider when deciding whether to rent or buy?

When deciding where to live, consider your financial stability, short- and long-term goals, current housing market conditions, and housing needs. If you expect to move frequently, renting might give you the flexibility to do so. If you 

How do maintenance costs compare between renting and buying?

Renters typically do not pay for maintenance or repairs to rental properties, while homeowners are responsible for most ongoing repairs and upkeep of their homes. In its Home Care Price Index, Thumbtack found the average cost of home maintenance was over $10,000 in the second quarter of 2024. Maintenance you should budget for includes roof repairs, heating and air conditioning upkeep, appliances, and other wear and tear. One rule of thumb is to plan on setting aside 1% to 4% of your home’s value per year for maintenance.

Can renting be a better option in a volatile housing market?

Renting can offer more flexibility and lower risk during a volatile housing market. Freddie Mac reported that total home sales declined in June 2024, likely a response to high interest rates. In addition, the inventory of new homes picked up compared to last year, but was still below pre-pandemic levels. The combination of high interest rates and low housing inventory has made renting a more appealing option for many; Realtor.com reported earlier this year that renting a home was more affordable than buying in many areas. 

How does my credit score affect my ability to buy a house?

Lenders use credit scores and other factors to determine eligibility and rates. Your credit score gives lenders a quick view of how you’ve handled debt in the past so they can assess how likely you are to repay debt. A higher score can improve your chances of securing a mortgage with favorable terms, while a lower score may limit your options or increase borrowing costs. Many lenders use the FICO scoring model, which considers a good score to be between 670 and 739. If you’re getting a conventional loan, you may be able to qualify with a credit score as low as 620, but you might have to pay a higher interest rate or have a financial profile that excels in other areas, such as having low debt or significant savings.