The question of whether to buy a house or continue to rent is one that Cicely Jones had heard so many times that she ended up devoting an entire chapter to why it’s OK to rent forever in her book on financial planning for young couples.
“So many people experience so much stress and anxiety around this pressure,” Jones, a certified financial planner with Equitable Advisors, told MarketWatch.
Many of her clients are high earners who live in the San Francisco Bay Area or other expensive cities and doubt their ability to ever afford a home.
Jones’s pro-renting stance echoes that of many younger aspiring homeowners who are facing a challenging housing market. Prohibitively high housing costs mean they’re unable to buy a home, leading some to give up on what was once a key facet of the American dream.
These people, who consider themselves affluent but have decided to rent indefinitely, aren’t alone in questioning whether owning property is still a marker of success.
Nearly two-thirds (64%) of Americans say that buying a home is not the measure of achievement it once was, according to a new NerdWallet survey of over 2,000 adults. That’s 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 is not necessarily true,” Jones said. “A lot of people end up being much better off renting than those pressured to buy a home,” who can then face unexpected costs such as home repairs.
About 54% of respondents in the NerdWallet survey also said that there is too much pressure to own a home in the U.S. That sentiment is more pronounced among younger demographics, with 60% of Gen Z and millennial respondents saying so, compared to 56% of Gen Xers and 46% of baby boomers.
The median price for existing home in the U.S. was $ 382,600 as of December 2023. With the 30-year mortgage rate now averaging 6.6%, buyers would have to earn six figures to comfortably afford a mortgage and housing costs — meaning that those costs would take up a maximum of 30% of their monthly income.
“You don’t need to own a home to be wealthy someday,” Jones said. “There is no guilt in not being able to buy.”
Consequently, renting offers a cheaper alternative. In most of the U.S., renting a three-bedroom house is cheaper than buying one. And 37% of respondents to the NerdWallet survey said they plan on renting “forever,” with over half saying they don’t think they will ever be able to afford homeownership.
Aside from affordability, renting also provides flexibility for some people. Jones recalled recent clients who chose to rent so that they could invest the money rather than making a higher mortgage payment, and also have the ability to move whenever they wanted to, since their families were scattered across the country.
Yet despite the bleak sentiment expressed by many young Americans, they are still owning homes at a faster pace than their elders, according to recent data.
Gen Z owns more homes than previous generations at the same age
Even though only a quarter of their generation owned a home in 2023, adult members of Gen Z are tracking ahead of where their parents were when they were the same age, according to analysis from real-estate brokerage Redfin.
The homeownership rate among 24-year-old Gen Zers was about 28% as of 2023, which is higher than the 24% rate for Gen Xers when they were 24, Redfin noted.
The company attributed the increase in young people owning homes to comparatively low mortgage rates during the pandemic home-buying spree. In contrast, when millennials and Gen Xers were in their early-to-mid-twenties, homeownership was arguably more difficult due to the Great Recession and double-digit mortgage rates, respectively.
Deeply personal decision to buy or rent
Ultimately, whether it’s a better idea to rent versus own “really depends on the person and the geography that they’re in,” Jones stressed.
Buying a home can act as a form of forced savings, and it’s a great tool for conservative investors, Jones noted. If the buyer plans to live in their home for an extended period of time, making the monthly mortgage payments would go toward building equity in the home, she added.
For others who have a higher tolerance for risk, the stock market and other options present higher returns. “But again, everybody needs to run the numbers for themselves to see if it makes sense,” she added.
Related: More renters than ever now spend too much of their incomes on housing, Harvard study finds