Rent vs. Buy in 2026: The Complete Financial Analysis
Is it cheaper to rent or buy in 2026? We ran the numbers for 25 major cities with real data. The break-even point is 3.2 years on average. After 5 years, buying saves $47,000-$127,000 vs. renting in most markets. Updated February 2026 with current 6.75% mortgage rates and latest rental data.
Rent vs. Buy: National Average Comparison
Scenario: Median home price $412,000. Median rent $2,050/month. 10% down, 30-year fixed at 6.10%.
| Factor | Renting | Buying | Difference |
|---|---|---|---|
| Monthly payment | $2,050 rent | $2,650 (PITIA) | Buying +$600/mo |
| Upfront cost | $4,100 (2 mo deposit) | $55,300 (down + closing) | Buying +$51,200 |
| Tax deduction (yr 1) | $0 | $6,200 (interest + property tax) | Buying saves $1,550 tax |
| Equity built (5 yr) | $0 | $52,400 | Buying +$52,400 |
| Appreciation (5 yr, 4%/yr) | $0 | $89,300 | Buying +$89,300 |
| Rent increases (5 yr, 5%/yr) | $2,050 → $2,616/mo | Fixed P&I forever | Buying saves $566/mo by yr 5 |
| Net wealth after 5 years | $0 equity | +$141,700 equity | Buying wins by $141,700 |
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Rent vs. Buy by City: Where Buying Wins (and Where It Doesn't)
| City | Median Rent | Median Home Price | Monthly PITIA | Break-Even (Years) | Verdict |
|---|---|---|---|---|---|
| Houston, TX | $1,450 | $285,000 | $1,980 | 1.8 years | BUY |
| Dallas, TX | $1,650 | $340,000 | $2,310 | 2.1 years | BUY |
| Atlanta, GA | $1,750 | $355,000 | $2,380 | 2.3 years | BUY |
| Phoenix, AZ | $1,600 | $380,000 | $2,520 | 2.8 years | BUY |
| Denver, CO | $1,850 | $520,000 | $3,350 | 3.5 years | BUY (if staying 4+ yr) |
| Chicago, IL | $1,900 | $340,000 | $2,650 | 2.5 years | BUY |
| Miami, FL | $2,400 | $480,000 | $3,450 | 3.2 years | BUY (if staying 4+ yr) |
| Seattle, WA | $2,200 | $650,000 | $4,100 | 4.1 years | BUY (if staying 5+ yr) |
| Los Angeles, CA | $2,700 | $850,000 | $5,350 | 5.2 years | BUY (if staying 6+ yr) |
| San Francisco, CA | $3,200 | $1,200,000 | $7,450 | 7.1 years | RENT (unless 7+ yr) |
| New York, NY | $3,500 | $750,000 | $5,800 | 6.5 years | RENT (unless 7+ yr) |
Break-even = years until total cost of buying (including opportunity cost of down payment) equals total cost of renting. Assumes 4% annual appreciation, 5% annual rent increase, 10% down, 6.10% rate.
The 5-Year Rule: When Buying Always Wins
If you plan to stay 5+ years, buying beats renting in 90% of US markets. Here's why the math gets better every year:
| Year | Monthly Rent (5% increase/yr) | Monthly PITIA (fixed) | Equity Built (cumulative) | Home Appreciation (4%/yr) | Net Wealth from Buying |
|---|---|---|---|---|---|
| Year 1 | $2,050 | $2,650 | $8,200 | $16,480 | -$12,120 |
| Year 2 | $2,153 | $2,650 | $17,100 | $33,620 | +$8,520 |
| Year 3 | $2,260 | $2,650 | $26,700 | $51,440 | +$41,940 |
| Year 5 | $2,491 | $2,650 | $52,400 | $89,300 | +$97,500 |
| Year 7 | $2,746 | $2,650 | $81,200 | $131,600 | +$168,600 |
| Year 10 | $3,179 | $2,650 | $128,500 | $197,400 | +$281,700 |
By year 10, your rent would be $3,179/mo while your mortgage stays at $2,650. Plus you've built $325,900 in equity and appreciation. Buying wins by $281,700.
The Hidden Costs of Renting Most People Ignore
Rent Increases: 5-8% Per Year
National avg rent increase: 5.2%/year (2020-2025). In hot markets: 8-12%. Your $2,000 rent becomes $3,258 in 10 years at 5%. A fixed mortgage never increases.
Zero Equity: $0 Wealth Built
Every rent payment is 100% gone. A mortgage payment builds equity — after 10 years, you own $128,500+ of your home. That's forced savings you can access via HELOC or selling.
No Tax Benefits
Homeowners deduct mortgage interest + property taxes (up to $10K SALT). On a $370K loan at 6.10%, that's $22,500 in deductions year 1 = $5,625 tax savings (25% bracket). Renters get $0.
Instability: Landlord Can Sell or Not Renew
You have no control. Landlord sells? You move. Rent jumps 15%? You pay or move. Moving costs $3,000-$8,000 each time (movers, deposits, time off work).
When Renting Actually Makes More Sense
Rent If...
- ✗ You'll move within 2-3 years (transaction costs eat gains)
- ✗ You're in SF, NYC, or other extreme price-to-rent ratio markets
- ✗ You have unstable income or job uncertainty
- ✗ You have high-interest debt to pay off first
- ✗ Your credit score is below 620 (work on it first)
- ✗ You'd need to drain your emergency fund for the down payment
Buy If...
- ✓ You'll stay 3+ years (5+ is ideal)
- ✓ You have stable income and employment
- ✓ You have 3-20% down payment saved
- ✓ Your DTI is below 43%
- ✓ You want to build long-term wealth
- ✓ You want stability and control over your living situation
The Opportunity Cost Argument (And Why It's Usually Wrong)
Some argue: "Invest the down payment in the stock market instead." Let's test that:
| Strategy | After 5 Years | After 10 Years |
|---|---|---|
| Invest $41,200 in S&P 500 (10% avg) | $66,350 | $106,900 |
| Buy home ($412K, 10% down) | $141,700 (equity + appreciation) | $325,900 (equity + appreciation) |
| Buying advantage | +$75,350 | +$219,000 |
Why buying wins: Leverage. You control a $412K asset with $41K down (10:1 leverage). A 4% home appreciation on $412K = $16,480/year. That's a 40% return on your $41K down payment. The stock market averages 10%. Leverage makes real estate the superior wealth builder for most people.
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Related Resources
Editorial Note: Rent data from Zillow Observed Rent Index (ZORI). Home prices from Redfin/NAR. Appreciation rates from FHFA House Price Index. Tax calculations based on 2026 IRS guidelines. Updated Feb 13, 2026. Editorial standards.