7% rates broke the ‘It’s better to buy than rent’ rule

We’ve all heard the broken record: It’s better to buy than rent. But with mortgage rates over 7%, is that still true?

The latest numbers from Zillow suggest the math has changed. Today’s typical rent runs $1,948 per month. The typical mortgage payment—assuming a 30-year fixed-rate loan, 10% down, 6.67% rate, plus taxes and insurance—comes to $3,014. That means renters hang onto an extra $1,066 per month, or $12,792 a year.

That gap looks even bigger once you factor in what renters could do with that extra cash. Put it into a 10-year Treasury bond earning a steady 4.68%, and that first year’s savings alone would grow by another $322. Keep saving and investing at that pace for five years, and the total nest egg tops $72,000.

“The idea that renting is a consolation prize is outdated,” argues Zillow’s chief economist Mischa Fisher. “When mortgage costs are running hundreds of dollars more per month than rent, renters who are intentional about saving and investing the difference are often making a sound financial decision.”

The new rent vs. buy balance

It wasn’t always this way. Back in 2010, when mortgage rates settled into the sweet 4% range for most of the decade, buying was actually cheaper than renting nationwide. Then rates spiked in 2022, and the tables turned. Renting is now cheaper than buying in all 50 major US metros—ridiculously so in some markets. The spread is widest in San Jose, CA, where renters save $7,883 per month over buyers, followed by San Francisco ($5,413/month), Los Angeles ($4,441/month), and San Diego ($4,235/month). Over five years, renters in San Jose who invest that difference could end up $532,446 richer than homeowners.

But that doesn’t mean renting wins forever. Homebuyers may pay more up front, but they typically make it back—and then some—as they pay down their mortgage and their home’s value climbs over time. Data shows that the typical buyer putting 5% down reaches the financial break-even point with renting after 5.9 years. This timeline varies by location, too. Buyers in Columbus, OH, come out ahead of renters in just 3.5 years, followed by Memphis, TN (3.7 years), and Buffalo, NY (4.2 years). Meanwhile, in San Francisco, San Jose, and New Orleans, buyers who hunker down in their homes for 30 years still end up with less in the bank than renters.

The moral of the story? Your personal rent-or-buy math depends on where you’re shopping and how long you plan to stay put. A rent-versus-buy calculator can help you run the numbers and see what actually makes sense for you. The decision might not come down to money alone, but a clear cost comparison beats leaning on age-old wisdom that no longer holds water.