Another Way To Calculate Costs For Renting And Owning

Renting can be cheaper than owning initially, but over time, purchasing a home wins out.

Jonathan Smoke, the chief economist of Realtor.com, crunched the numbers on renting vs. owning. Based on the median home price, median rent, average costs for upkeep, insurance, and property taxes, and 2 percent inflation, home equity starts to surpass rental savings after three years. Annual owner costs as a whole become cheaper than rental costs after 22 years, making homeownership a long-term play.

In Year 31, the financial difference between the two households in our illustration is stark. The renter is then spending $2,202 in rent. The owner, mortgage-free, is paying only property taxes, insurance, and upkeep for about $1,020 per month. The owner also has a home that is worth around $450,000 in inflation-adjusted dollars.

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