How the rent vs buy verdict is calculated

Two people begin our rent vs buy comparison with equal savings in the same city. One path is renting and investing money that would cover a down payment and closing costs. The other person buys with 20% down. Each year, we add up what each person spends and can't recover. At the year you'd move, the cheaper path takes the stamp.

Two paths compared year by year

• Each year, the renter's rent payment rises in line with rent growth. The investment return makes the savings grow. Rent paid minus what the savings earned is the renter's net cost.
• On day one the owner pays the buying costs, and the mortgage, property tax, insurance and upkeep come after that. Each year, the home gains value. The owner sells at the end, covers the selling costs and keeps the rest. Total payments and the down payment, minus money left after the sale, make up the owner's net cost.

Break-even occurs in the first year when the owner's net cost equals or falls below the renter's. Our calculation covers up to 30 years. If the money involved leaves both paths within 2% of each other, the stamp says toss-up rather than picking one.

Sources of each default

• Typical rent and home value: the latest month's city figures from the Zillow Observed Rent Index and Home Value Index. Zillow Group provides the data.
• Mortgage rate: the Freddie Mac Primary Mortgage Market Survey lists 7.24% for the latest week's 30-year fixed rate.
• Home price growth: long-term yearly growth for the state comes from the FHFA house price index, covering 1995 to 2025.
• Rent growth: the BLS consumer price index for rent shows a long-run rise of 3.5% a year.
• The annual investment return is 8.3%. This is based on 60% US stocks and 40% Treasury bonds with 10-year terms, using returns recorded from 1928 to 2025. NYU Stern provides the source through Aswath Damodaran's historical returns.
• Property tax: we take the median real estate taxes of the city and divide by its median home value. Data comes from the Census American Community Survey, 2020 to 2024.
• Insurance: the same survey reports the city's median yearly homeowners insurance.
• Upkeep runs at 1% of the home's value each year. This is the low end of the common 1% to 4% rule of thumb used as a guideline.
• Buying costs: 3.5% of the price, which sits midway in the 2% to 5% closing-cost range Freddie Mac gives.
• Selling costs take 6% of the price. According to Realtor.com, agent commissions alone have often cost 5% to 6%, and sellers also pay some closing costs.

Behind each city's stamp sit the numbers listed on that city page, and you can change any of them using the rent vs buy calculator.

What we don't include

• Deductions for taxes. We use the standard deduction that most households take, leaving mortgage interest and property tax without deductions. The IRS guidance explains when itemizing is worthwhile.
• Lenders charge PMI insurance when your down payment is less than 20%. The 20% down default means PMI doesn't apply.
• Taxes charged on gains. The model doesn't tax the renter's investments or the owner's sale.
• Adjustments for inflation. All amounts use plain dollars from each year.
• Moving, furniture and what a garden is worth. These things are real but personal, so you weigh them yourself.

How we chose the cities

Our starting point is every US city with 50,000 or more people in the population estimates from the Census. A city receives a page if Zillow publishes both a rent series and a home value series for it. The result is 813 cities. The city listing for rent vs buy names the few missing one or both series.

When the figures change

Monthly changes affect rents, prices and the mortgage rate. Each data refresh recalculates all stamps, city pages and the open dataset with the same formula. Your browser calculator uses that exact formula, so with matching numbers its result always agrees with the city page.