The question of whether to buy a home or continue renting is one Cecily Jones has heard so many times that she ended up devoting an entire chapter to why it's okay to rent forever in her book on financial planning for young couples.
“A lot of people are experiencing a lot of stress and anxiety around that stress,” Jones, a certified financial planner with Equitable Advisors, told MarketWatch.
Many of her clients are high-income people who live in the San Francisco Bay Area or other expensive cities and doubt they will ever be able to afford a home.
Jones' pro-renting stance mirrors that of many younger aspiring homeowners facing a challenging housing market. Skyrocketing housing costs mean they are unable to afford a home, prompting some to give up what was once a key aspect of the American dream.
These people, who consider themselves wealthy but have decided to rent indefinitely, are not the only ones wondering whether owning property is still a sign of success.
Nearly two-thirds (64%) of Americans say buying a home is no longer the measure of achievement it once was, according to a new NerdWallet poll of more than 2,000 adults. This is up from six in 10 respondents surveyed last year.
“A lot of people are starting to realize that what we've been fed our whole lives isn't necessarily right,” Jones said. “Many people end up being better off renting than those who are pressured to buy a home,” who can then face unexpected costs such as home repairs.
About 54% of NerdWallet survey respondents also said there is a lot of pressure to own a home in the United States. This sentiment is even more pronounced among younger demographics, with 60% of Gen Z and Millennials saying so, compared to 56% of NerdWallet survey respondents. Gen Xers and 46% of baby boomers.
The median current home price in the United States was $382,600 as of December 2023. With the average 30-year mortgage rate now at 6.6%, buyers will have to earn six figures to comfortably afford their mortgage and housing costs — meaning These costs will take a maximum of 30% of their monthly income.
“You don't need to own a house to be rich one day,” Jones said. “There is no guilt in not being able to buy.”
Therefore, renting provides a cheaper alternative. In most of the United States, renting a three-bedroom home is cheaper than buying a home. 37% of NerdWallet survey respondents said they plan to rent “forever,” with more than half saying they don't think they'll ever be able to afford homeownership.
Aside from affordability, renting also provides flexibility for some people. Jones pointed to recent clients who choose to rent so they can invest money instead of making higher mortgage payments, and also have the ability to move whenever they want, since their families are scattered across the country.
But despite the bleak sentiments expressed by many younger Americans, they are still owning homes at a faster pace than older people, according to recent data.
Generation Z owns more homes than previous generations at the same age
Although only a quarter of their generation owned a home in 2023, adult members of Generation Z are tracking where their parents were when they were the same age, according to an analysis from real estate brokerage Redfin.
The homeownership rate among Gen Z 24-year-olds was about 28% as of 2023, which is higher than the 24% rate for Gen Z when they were 24, Redfin noted.
The company attributed the increase in the number of young people owning homes to relatively low mortgage rates during the pandemic home buying wave. In contrast, when Millennials and Generation X were in their early to mid-20s, home ownership was arguably more difficult due to the Great Recession and double-digit mortgage rates, respectively.
A deeply personal decision to buy or rent
Ultimately, whether renting is better than owning “really depends on the person and the geography they're in,” Jones stressed.
Jones noted that buying a home can serve as a form of forced saving, which is a great tool for conservative investors. She added that if the buyer plans to live in their home for an extended period of time, the monthly mortgage payments will go toward building equity in the home.
For others with a higher risk tolerance, the stock market and other options offer higher returns. “But again, everyone needs to run the numbers themselves to see if it makes sense,” she added.
Related: A Harvard study found that more renters are now spending more of their income on housing than ever before
