I’ve found myself in a lot of conversations lately with clients from various backgrounds: some considering buying their first home, some thinking about upgrading to get more space, others downsizing to optimize for what they actually need now. All of these conversations end up centering on the economics of buying versus renting. It’s a nuanced issue; there are a lot of factors at play, not limited to your own financial and employment stability, but also current market conditions and economics.
For those of you who read the piece I wrote earlier this year, “Evolving the Plan,” you know where I landed on this decision personally, and I can confirm I continue to be completely comfortable and happy with it for now. I recognize our specific situation is a bit lucky: we found a place with reasonable landlords, more space than we could have comfortably afforded buying in the same area and school district, and relative stability, since this could be a long-term situation if we wanted it to be.
However, while our situation may not represent a general calculus for renting versus buying, our decision has only been reinforced the more I think through the rent-versus-buy math more broadly. We grew up thinking of renting as throwing money away, and I don’t believe that’s generally true, especially if it means taking on a large mortgage, facing steep property taxes, insuring a place that’s become genuinely hard to insure, and absorbing ongoing maintenance costs. Those are real costs most people don’t fully account for when comparing renting against buying. For us, renting was a fairly easy financial decision; for others, it may not be as clear-cut. But the calculus has shifted for many lately, and here’s why.
First, rates: 30-year mortgage rates recently climbed above 7%, representing a sizeable jump when compared with the pandemic lows we’ve seen in recent history. That alone reshapes the monthly math on a new mortgage. It could also have a freezing effect on the broader residential real estate market: homeowners sitting on 3-4% rates from a few years back are increasingly unwilling to sell and give those up, which could keep inventory tight and prices elevated even as buyer demand cools. It’s a strange moment where owning can mean being stuck, and renting means staying flexible.
Second, property taxes: for those of us living in California, Prop 13 resets your assessed value to your purchase price the day you buy. Buying today locks in a tax basis at today’s elevated prices, not the lower basis a longtime owner down the street is still sitting on.
Third, and maybe the most underappreciated factor: insurance. California homeowners have watched carriers pull back, non-renewals climb, and premiums jump by double digits in a single year, with the state’s FAIR Plan, the insurer of last resort, absorbing a growing share of the market. This may not show up in a quick back-of-envelope mortgage calculation, but it’s a real cost associated with ownership, and one that can vary significantly depending on location.
There’s a fourth cost that doesn’t show up in any of these numbers: maintenance, and not just the dollars, but the time and mental bandwidth it demands. When we owned our fixer-upper, we got hit with a number of surprises, including a sewer lateral replacement and a major drainage issue. On top of that, our insurance company flew a drone over the house and told us we needed a new roof or they’d drop us. Neither of those showed up in any spreadsheet when we bought the place. For people who genuinely enjoy tinkering, fixing things themselves, and treating the house as an ongoing project, that kind of ownership can be a source of real satisfaction. For me, it was just one more thing I was responsible for and didn’t particularly enjoy. That’s worth being honest with yourself about before you buy: are you signing up for a hobby, or a chore?
None of this means buying is wrong, now or ever. Our home proved to be a decent investment, and I am confident we will likely buy another home one day in the future. With that being said, if you’re weighing this decision, the question isn’t “is renting throwing money away,” it’s “what does the full carrying cost actually look like this year, for this property,” including taxes, insurance, and maintenance, not just principal and interest. As with anything in life, it is always a good practice to run the real numbers and consider your own personal goals and financial plan before simply running with an old narrative that may no longer be true.
