Key takeaways:

• Mortgage rates remain elevated at 6.58%, shaping housing affordability decisions.
• Buying is cheaper in 18 of the 50 largest metros; renting is more cost-effective in 32.
• The largest monthly savings for buyers is in Chicago, IL ($495 less than renting), while the largest monthly savings for renters is in San Jose, CA ($4,783 less than buying).
• Renting among adults 55+ is growing rapidly, with a 30% rise in renters 65+ over the past decade.

Renting and buying each offer unique financial advantages; choosing wisely requires evaluating personal goals, lifestyle, and market trends.

The buy-versus-rent debate has long been a fixture in personal finance. For decades, the advice leaned toward ownership as the cornerstone of wealth-building, with 29% of Americans listing buying a home as the most financially impactful life change and setting 30 as the ideal age to buy a first home. Homeownership is equated to success by 52% of Americans, according to Empower research.

But in 2025, the equation is more nuanced than ever. High mortgage rates, record-setting home prices, and changing rental dynamics are altering the financial and lifestyle trade-offs for households of all ages.

Read more: Home sweet home: A majority of Americans want to age in place

Mortgage rates: Off the peak but still elevated 

The cost of borrowing remains one of the most influential factors in the decision to buy. The average 30-year fixed mortgage rate sat at 6.58% as of August 13, down from the high of 7.79% in 2023, according to Freddie Mac and Federal Reserve Economic Data (FRED).¹ These rates are much less appealing to potential buyers than the sub-4% rates that 48% of U.S. mortgage holders currently have, with nearly three-fourths (74%) unwilling to lose their current rate, according to Empower research.

Fannie Mae forecasts that rates on 30-year fixed loans could ease to 6.4% by the end of the year, and 6% by the end of 2026. Mortgage rates above 5.5% represent a psychological tipping point for more than half (54%) of homeowners, significantly influencing decisions to delay purchases.

Read more: Homeowners are doing mortgage math — this is their tipping point

Home prices: Growth persists despite higher rates 

Despite affordability challenges, home prices have not meaningfully declined. The median price of existing homes in the  U.S. reached an all-time high of $435,300 in June 2025, and this record price is influencing buyers to reconsider their home-buying decisions.² However, U.S. home prices could ease this year, with Redfin forecasting a 1% decline nationally, and Zillow predicting a 0.8% drop.

Read more: All things equal? Why new home prices are nearly the same as existing homes

Rent costs narrow the gap 

Rents have climbed, with Zillow data placing the national average at $2,100 monthly, as of August.³ In many areas, the difference between renting and buying — at least on a monthly basis — has narrowed to the point where mortgage payments and rents are comparable.

For example, a median-priced home of $435,300 with a 20% down payment at 6.58% carries a principal and interest payment of about $2,219 per month.⁴

Analyzing Zillow rental and home prices in the 50 largest metro areas (excluding New Orleans, LA, for which complete data was not available) reveals that buying is cheaper in 18 cities, while renting is the better financial choice in 32 metros.⁵ The biggest advantage for buyers is in Chicago, IL, where the monthly mortgage payment is $495 less than the median rent. Renters see the largest savings in San Jose, CA, where monthly rent is $4,783 less than buying.

Read more: How empty-nest homes fit into the housing equation

Top 10 metros where buying is cheaper:

Top 10 metros where renting is cheaper:

Additional costs to consider 

There’s more to owning a home than just paying the mortgage: Homeowners must also plan for ongoing expenses, including homeowner’s insurance, property taxes, regular maintenance, and the possibility of HOA fees. Tenants’ and household insurance costs are rising, up 5.8% in July compared to a year earlier, according to the Consumer Price Index.⁶ Understanding the full picture — principal, interest, taxes, and insurance (PITI) — is crucial, with financial analysts recommending these costs not exceed 28% of gross income.

Opportunity cost: What else could the money do? 

Buying a home typically requires a substantial down payment. For a $435,000 home, a 20% down payment equals $87,000. If that amount were invested in a diversified portfolio returning 6% annually, and just $100 a month added to it, it could grow to $172,130 in 10 years. This is the essence of opportunity cost: Money tied up in home equity may grow more slowly than investments, and it is less liquid. Renters maintain greater flexibility to access and redeploy capital, while owners benefit from potential appreciation and the “forced savings” of mortgage principal repayment.⁷

Read more: Tapping in: Home equity lending starts to flow again

Capital gains and taxes on a sale 

The tax implications of selling a home are another important factor. Homeowners can exclude up to $250,000 in capital gains from the sale of a primary residence if single, or $500,000 if married filing jointly, provided the home was owned and used as a primary residence for at least two of the past five years. Gains above these thresholds are taxable, although the federal administration is considering ending capital gains taxes on home sales.⁸

This exclusion can be a powerful wealth-preservation tool, but it doesn’t apply to rental properties. For those considering downsizing, the timing of the sale — and reinvestment of proceeds — can significantly affect net returns.

Read more: Why buyers are slowly gaining an edge in a challenging housing market

Wealth-building through home equity 

Homeownership remains a primary source of wealth for Americans. Federal Reserve data show total U.S. home equity was over $35 trillion in 2024, with homeowners’ median net worth at $400,000, compared to just $10,400 for renters.⁹ This wealth gap underscores the long-term potential of equity growth, even in a higher-rate environment.

Read more: Forget buying a first home — buy a first property instead

Credit-building changes benefit renters 

Recent credit-scoring reforms have improved the financial position of renters. VantageScore 4.0 now factors in rent and utility payments, allowing consistent rent payers to build credit history that can help secure competitive mortgage terms in the future. Up to an additional 5 million prospective borrowers could qualify for Fannie and Freddie mortgages as a result in this new credit scoring option.

Lifestyle and flexibility considerations 

The financial math is only part of the decision. Lifestyle needs matter:

• Early career professionals may prioritize mobility between cities, making renting more practical.
• Families with school-age children may value the stability of ownership.
• Remote workers may view buying in lower-cost areas as a path to long-term savings.
• Retirees or empty nesters may find renting a strategic way to unlock equity and reduce maintenance burdens.

Renting trends for adults 55 and older

While homeownership tends to climb with age, the fastest-growing group of renters is those 55 and older, according to 2023 Census Bureau data compiled by the National Investment Center for Seniors Housing & Care.^10,11 The share of renters 65 and older has risen 30% over the last decade.

This shift reflects both lifestyle preferences and financial strategy — many older adults are selling homes to unlock equity, reduce maintenance responsibilities, and gain flexibility in retirement.¹² They are exploring a range of options: downsizing to apartments in walkable neighborhoods, moving into age-restricted communities, or choosing luxury rentals that offer amenities without the long-term commitment of ownership.

Methodology 

This analysis uses June 2025 Zillow Home Value Index (ZHVI) mid-tier median home prices for each of the 50 largest U.S. metro areas. For each metro, the typical monthly mortgage payment was calculated assuming a 20% down payment and a 30-year fixed mortgage at the current average interest rate of 6.58% (as reported by the Federal Reserve Economic Data). Monthly principal and interest (P&I) payments were determined using the standard mortgage amortization formula. These costs were then compared to June 2025 median rents from the Zillow Observed Rent Index (ZORI). The “cheaper to” label indicates whether the monthly mortgage or the rent is lower for that metro.