Should I buy a house or keep renting?

2. Should I buy a house or keep renting in my city?

The odds come down to your city. When homes cost much more than rents, renting wins. When homes cost little compared with rents, buying wins. We run the test on each city using Zillow's rents and prices with 20% down. Over 7 years, renting comes out ahead in 71% of them.

Buying wins in cities such as Philadelphia and Jacksonville. Prices run far ahead of rent in San Jose and Seattle, and renting wins there by a wide margin. For Chicago and Houston, it's a toss-up, so your own numbers decide. Check rent vs buy by city for your city. For a quick read, check the home price to rent ratio, which divides the home price by one year of rent.

3. Can you handle every cost of owning, not just the mortgage?

The mortgage covers just one part of what you pay. Property tax, insurance and upkeep come on top for owners. They also give up the return that their down payment could have earned. Consider a home priced at the typical US level of $332,700, financed with a loan at 7.24%. Those costs reach about $2,950 a month in year 1. According to the Census survey, the typical US rent is $1,413.

Those costs keep going up. Home insurance premiums rose 57% between 2019 and 2024, according to Harvard's Joint Center for Housing Studies. According to the same report, affording a home priced at the median with 3.5% down takes a first-time buyer $126,700 a year or more. Just 6 million renters out of nearly 46 million nationwide earn that much.

If owning leaves nothing over for savings, wait. If you can barely afford a home, every repair turns into a crisis.

4. What return would your down payment earn instead?

Cash tied up in a house isn't free. A 20% down payment on a $332,700 home comes to $66,540. Closing costs at 3.5% add about $11,645 more. Instead, a renter can invest that $78,185. Over the long run, stocks and bonds together have returned about 8.3% a year, according to Damodaran's data at NYU Stern. At that rate, the cash would bring in about $6,490 in year 1 alone.

Buying carries a hidden cost: the return you gave up. A house earns something too, from price growth and rent you no longer pay, and our verdicts weigh both sides. Still, the renter wins only if that money stays invested. Buying is the safer choice if the money would get spent. We look at this more closely in rent and invest vs buy.

5. Are the other parts of your life ready?

Buying a house locks up cash and makes moving both slow and expensive. The CFPB advises setting aside three to six months of expenses as an emergency cushion before you buy. That cushion is separate from your down payment and closing costs, and the CFPB puts those costs at 2% to 5% of the price.

Watch for three more signs: income you expect to remain steady, debts under control, plus a place you want to stay. Still wondering "should I keep renting or buy"? Any shaky answer on these points to one more lease. That is not quitting. Renting is a strategy, not a failure. When all five answers line up, plug your own price, rent and years into the rent vs buy calculator.