At a 15-year horizon, most U.S. markets tilt toward buying — but not by as much as many people expect, and not in every market. The honest comparison is net worth: what each household actually holds after all costs.
The buyer builds wealth through equity: the appreciated home value minus the remaining mortgage balance, minus the cost of selling. The renter builds wealth through investments: the down-payment equivalent compounding in a portfolio, plus any monthly savings from spending less on housing.
Neither approach is automatically superior. The variables that matter most are how long you stay, what investments earn versus what the home appreciates, and how rapidly local rents are rising relative to purchase prices.
The leverage argument for buying
Homeownership is one of the few legal, accessible forms of leverage available to ordinary households. A 20% down payment on a $400,000 home controls a $400,000 asset. If the home appreciates 4% annually, that is $16,000 in year one — a 20% return on the $80,000 invested. A stock portfolio returning 5% on the same $80,000 generates $4,000.
This leverage compounds. As the mortgage balance falls and home value rises, equity grows from both directions simultaneously. Over 15 years, a $400,000 home at 4% annual appreciation is worth roughly $720,000 — and enough principal has been paid down that equity at sale can easily exceed $400,000 after selling costs.
The liquidity argument for renting
A renter keeps the down payment liquid and diversified across many assets. Unlike a home, a portfolio can be rebalanced, accessed in emergencies, and is not concentrated in a single local market. Renters also avoid transaction costs: no 3% to enter, no 6% to exit, no emergency repair bills. That capital stays in the compounding pot throughout.
The renter's advantage narrows over time as rent grows while the mortgage stays fixed. At 3% annual rent growth, a $2,000 monthly rent in year 1 becomes $3,116 in year 20 — while the buyer's principal and interest payment is locked at $2,023 forever. This growing monthly gap is why long holds tend to favor buying in most markets.
Where the scenarios converge or diverge
Two scenarios push toward renting even over the long run: very high price-to-rent markets (above 25), and situations where investment returns significantly outpace home appreciation. If local homes appreciate 2% annually while a diversified portfolio delivers 8%, the opportunity cost of the down payment grows to dominate the comparison over 15 years.
Two scenarios push toward buying even in borderline markets: very long holds — 20 years or more, where paydown and appreciation compound fully — and rapid rent growth above 4% annually, which erodes the renter's monthly savings until little is left to invest. The 15-year horizon in the default above captures the crossover for typical U.S. market conditions.
Frequently asked questions
Is it better to rent or buy in the long run?
Over 15 to 20 years in moderate price-to-rent markets, buying typically generates higher net worth than renting and investing the difference. Leverage on home appreciation compounds over time, and mortgage payments stay fixed while rent rises. Short-term — under 7 years — renting and investing often matches or beats buying due to the weight of transaction costs.
Does buying always beat renting over time?
Not always. In markets with price-to-rent ratios above 25, the capital tied up in the down payment can grow faster in diversified investments than the leveraged home appreciates. Coastal California, New York, and similar markets often show renting ahead even at 20-year horizons in net-worth terms.
What does 'wealth' mean in rent vs buy comparisons?
Net worth: what you own minus what you owe. For the buyer it is home equity (appreciated value minus mortgage balance minus selling costs) plus any invested savings. For the renter it is the invested pot (down-payment equivalent plus monthly savings compounding over time). This calculator tracks both month by month.
How does rent growth change the comparison?
Rising rent shifts the advantage toward buying. Every percentage point of annual rent growth increases the renter's monthly outlay, leaving less to invest. Over 15 years at 3% rent growth, the renter's monthly payment rises by more than 50% — making the buyer's fixed mortgage look increasingly attractive.
What role does appreciation play?
Home appreciation matters more than many buyers realize because the mechanism is leverage, not raw appreciation. At 4% appreciation on a $400,000 home with 20% down, the first year's $16,000 gain represents a 20% return on the $80,000 invested — even though the house grew by only 4%. This leverage effect is why the buyer's net worth often pulls ahead in the long run.
Worked examples
Worked example 1
Long-horizon wealth comparison — 15 years
$400,000 home, 20% down, 6.5% rate, $2,000/month rent. 15-year horizon where appreciation and equity compound.
Monthly mortgage
$2,023
Verdict
Buying wins
Break-even year
Year 7
Net-worth edge at yr 15
+$84,138
Over 15 years the buyer builds $84,138 more in net worth — compounding equity outpaces the renter portfolio, especially once rent growth erodes the renter's monthly savings advantage.
What affects the result
Compounding equity versus compounding investment returns
Over long horizons, home equity compounds on the full home value (leveraged appreciation), while the renter's portfolio compounds only on contributed cash. This leverage effect strongly favours buyers at 10+ year horizons in markets with moderate appreciation.
Rent growth eroding the renter advantage
At 3% annual rent growth, rents double in roughly 24 years. A fixed-rate mortgage buyer's payment is locked. This gap — rising rent vs. stable mortgage — progressively narrows the renter's monthly surplus and portfolio contributions.
Investment return on renter portfolio
The renter's portfolio must outperform to keep pace. At 5% returns the buyer typically wins over 15 years in mid-PTR markets; at 7–8% the renter stays competitive longer. Higher market returns make renting more attractive in high-PTR cities.
More questions answered
Does buying always win over the long term?
Not always. In very high PTR markets (above 25), even 15–20 year horizons sometimes favour a disciplined renter who invests heavily. The outcome depends on local appreciation, the spread between your mortgage rate and investment return, and your HOA/tax burden. Run the calculator for your market rather than assuming buying always wins long-term.
How does a fixed mortgage protect against inflation?
A fixed-rate mortgage payment never changes while your income and rents around you rise with inflation. Over 15+ years this "payment lock" becomes increasingly valuable — your effective housing cost falls in real terms while your renter neighbours pay 3% more each year.
What happens if home prices fall?
Falling prices lengthen the break-even dramatically and can leave buyers underwater (owing more than the home is worth). This calculator uses your appreciation assumption throughout — model a scenario with 0% or negative appreciation to stress-test the buying decision before committing.
Model assumptions & disclosures
Equal-budget method. Both buyer and renter are assumed to spend the same total amount each month. The person with the lower required outlay invests the monthly difference into a diversified portfolio at the specified annual return. The renter also invests the down payment and estimated closing costs at the start of the comparison period.
Nominal figures. All rates — home appreciation, rent growth, and investment return — are nominal (not inflation-adjusted). Comparisons are internally consistent on a nominal basis.
No tax effects. Mortgage interest deductibility, capital gains exclusion on home sales ($250k/$500k), and investment account tax treatment are not modelled. Since the 2017 Tax Cuts and Jobs Act, fewer than 10% of taxpayers itemise, so the mortgage interest deduction is omitted as a default. Consult a tax professional for your specific situation.
Selling costs applied at horizon end. When computing buyer net worth at your planning horizon, the calculator deducts the specified selling-cost percentage from the home’s projected market value, reflecting the realistic proceeds from a sale.
Not financial advice. This calculator provides illustrative projections based on your inputs. It does not account for personal circumstances such as job security, credit score, local market conditions, or individual tax situations. Consult a qualified financial advisor or real estate professional before making housing decisions.