Renting vs Buying: A More Nuanced Financial Decision

Most people grow up hearing some version of the same line: buying a home is always the best financial move. It is easy to see why that idea sticks. A house feels tangible; it forces a kind of savings through mortgage payments, and plenty of owners can point to a big jump in value during certain stretches.

Brad Case, Chief Economist at Middleburg Communities, argues that the investment side of that story is a lot less automatic than people assume. In a December 8, 2023, research piece, he models buying versus renting over long holding periods and reaches a conclusion that makes many homeowners flinch a little at first: renting often wins as a wealth-building strategy when the money that is not tied up in a down payment and ownership costs is invested instead. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

That does not mean renting is always better, and it definitely does not mean buying is a mistake. It means the financial comparison depends on the assumptions, the time period, the local market, and what someone actually does with the extra cash flow that renting can create.

What the model is actually comparing

A lot of rent versus buy debates never get past a simple monthly payment comparison, and that is where people get misled. Case tries to compare wealth accumulation over a long horizon, not just whether rent is higher or lower than a mortgage.

On the buying side, his setup includes a 20 percent down payment, a 30 year fixed mortgage, and home price changes tied to the S and P CoreLogic Case Shiller National House Price Index. He also builds in ownership costs many people mentally downplay, like property taxes and repair and maintenance, and he accounts for selling costs at the end of the holding period. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

On the renting side, the renter invests the same starting money that the buyer used for the down payment, then invests the monthly cash flow difference when renting costs less than the modeled ownership costs. Rent levels move with CPI rent changes in the model. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

So this is not a claim that renting is superior because rent is cheaper. It is a claim that investing matters and that housing appreciation has historically not matched stock returns in many periods. Case also points out that housing is illiquid, slow to transact, and hard to “rebalance” the way a portfolio can be adjusted. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

Why buying can look like a great investment, even when it is not

One reason this topic gets heated is that homeowners often remember one part of the math and forget the rest. When someone buys a home, price appreciation feels like a return. Principal paydown feels like a return. That can be true, and leverage can amplify those results.

But the model forces a full accounting. Repairs, maintenance, property taxes, and transaction costs are real dollars. Even if a renter is “paying those costs indirectly” through rent, that does not automatically make buying superior as an investment. The comparison comes down to the total wealth position at the end, and what happened with the money that did not go into home equity along the way. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

Here is where a lot of real-life scenarios diverge from the headline arguments:

A renter who spends every “savings” dollar on lifestyle upgrades is not running the strategy the model assumes. In that case, buying may create forced savings that the renter never replicates, and that can make buying come out ahead for that household even if renting might have been the higher return path on paper.

A buyer who stretches into a house that consumes most of their monthly budget is not investing much outside the home. That can make the household extremely dependent on home appreciation, which is not always a comfortable place to be if job changes, relocation needs, or market cycles show up at the wrong time.

A buyer who purchases in a market with unusually strong long-term appreciation may outperform the national index used in a model. A buyer who purchases in a market with long stretches of flat appreciation may not.

None of those points “disproves” the modeling. They show why the rent versus buy decision is personal finance, not a bumper sticker.

A practical way to think about renting vs buying

If someone wants a cleaner way to think about this without building a full spreadsheet model, there are a few questions that get closer to the real issue.

Start with the investing question, since that is the hinge the entire argument swings on.

If renting frees up money each month, will that money actually be invested, and will it stay invested through market ups and downs?

If buying ties up most savings in home equity, is that fine because the household prefers simplicity, or is it happening by default because there is no plan for investing outside the home?

Then look at time horizon and flexibility.

If there is a decent chance of moving in the next few years, the cost of buying and selling can overwhelm any appreciation. Real estate commissions, closing costs, and the reality that a home sale can take months can matter more than people want to admit. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

If the plan is to stay put long term and the budget has room for maintenance and reserves, buying often becomes more attractive, not because it always beats renting financially, but because the household is spreading transaction costs across a longer period and gets stability benefits that do not show up neatly in a portfolio comparison.

Finally, be honest about what is being compared.

A common critique, including in responses to Case’s post, is that a median new construction home is not the same “quality” as a median rental unit. That is a fair point, and it is one reason a single model can never settle every situation. The right comparison is the actual alternative housing choices on the table, not a generic median versus median framing. (Middleburg Communities Research, “Renting is Usually a Better Investment than Buying,” December 8, 2023: https://paragonn-cdn.nyc3.cdn.digitaloceanspaces.com/middleburg.com/files/Renting-is-Usually-a-Better-Investment-than-Buying.pdf)

Actionable takeaway you can use this week

If the decision is active right now, one simple exercise can cut through a lot of noise.

Take the expected monthly cost difference between renting and buying for the specific properties being considered, including realistic ownership costs like taxes, insurance, and maintenance reserves. Then ask what happens if that monthly difference is invested automatically.

If the plan is to rent, set up an automatic transfer to an investment account that happens the same day rent is paid. That removes the “maybe later” problem that makes the renting strategy fail in real life.

If the plan is to buy, create the same discipline around reserves. A surprising number of homeowners end up house rich and cash strained because repairs and insurance increases show up at the same time the budget has no margin.

That one step does not answer every question, but it forces the conversation to be about behavior and cash flow, not just identity and tradition.

Where appraisal work fits into this conversation

Renting versus buying is a financial decision, but it often turns into a value discussion the moment a purchase is involved. Contract price, appraised value, and market support become part of the same story, and that is where good analysis matters. If a purchase, refinance, or planning decision in Southwest Florida depends on credible property valuation support, Gulf Stream Residential Appraisal can help clarify what the market data supports and how the property fits within its competitive set. More details on the process are here: https://gulfstreamres.com/how-it-works