Early in my divorce journey, I grappled with the question of whether I could afford to purchase a home or if it was even a wise financial decision. I researched both renting and buying to understand my monthly expenses and long-term financial outlook.
With a teenage son and a preteen daughter, I needed at least three bedrooms, which significantly limited my rental options. The upfront costs of buying a home were higher than renting. A property priced at around $180,000 would require a $36,000 down payment, plus several thousand more for closing costs. Conversely, renting a three-bedroom apartment would require first, last, and security deposits, totaling around $4,500, given that monthly rents started at $1,500.
Renting Doesn’t Build Wealth
However, the monthly cost of renting proved to be far steeper—about 50% more expensive than buying. With a purchase of $180,000 and a 20% down payment, my mortgage payment (including property taxes and homeowners insurance) would be approximately $1,040 per month, while the cheapest rental option was $1,500.
Some analyses suggest renting might be cheaper when considering monthly expenses related to homeownership. Yet, I disagree for two main reasons. First, part of my mortgage payment contributes to building equity in my home—money I can recover if I decide to sell. Over time, as I continue to make payments, the equity in my home grows. In contrast, every dollar spent on rent enriches someone else, and I never see any of that money again.
Second, many comparisons between renting and buying overlook the long-term financial benefits of homeownership. Owning a home is one of the most effective ways to build wealth—it’s akin to a savings account that appreciates over time. The opportunity cost of renting is substantial because I don’t recoup any of my money, and with current rental rates skyrocketing, the situation has worsened.
The Renting Trap
The reality is that securing housing—whether through renting or ownership—is becoming increasingly expensive. I realized that if I couldn’t make the down payment, I would likely be stuck in the rental cycle indefinitely. High rent prices leave many with little to no leftover cash each month to save. This predicament affects countless Americans, trapping them in a cycle of renting and hindering their chances for upward mobility typically associated with homeownership.
The prevailing narrative suggests that young individuals can save for a home by renting an affordable place and setting aside funds. But how can they save when their income is consumed by exorbitant rental costs? With children needing more space, that savings goal becomes even more challenging. If I had been forced to rent, my monthly savings would be minimal—perhaps a few hundred dollars at best—which translates to a 15-year wait for a down payment. By then, home prices would have skyrocketed further, making the goal even more elusive.
In some areas, renting can cost up to 50% more than buying, creating a barrier to saving for a down payment. This discrepancy is evident on platforms like Zillow, where rental premiums effectively stifle any chance of saving. Additionally, investors often outbid first-time buyers, acquiring affordable properties and driving up prices, further exacerbating the wealth gap for aspiring homeowners.
A Personal Reflection
When my ex-husband and I bought our first home in 2008, we were fortunate to live rent-free with a generous cousin for a year, allowing us to save $25,000. That experience laid the groundwork for our future financial stability. However, millions of Americans lack such support, leaving them at a disadvantage in an increasingly competitive housing market.
The rising costs of housing are a pressing issue that deserves more attention. While we rightly critique healthcare and education inequities, we must also acknowledge that many are slowly being priced out of basic shelter.