Americans spend over $300,000 on rent before buying a home, new study finds

The typical American rents for about 13 years, shelling out over $300,000, before buying their first home
By Sam Bourgi
•
06 September 2024
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Rent versus buy home

Americans who believe that renting is merely wasting money finally have the right to say, "I told you so."

Using Zillow and RentCafe data, fintech company Self Financial estimated that the typical American pays more than $333,000 in lifetime rent before finally becoming a homeowner.

The study assumes that most people start paying rent at age 22 and buy their first home at 35, which is consistent with estimates by the National Association of Realtors.

The average monthly payment comes out to around $2,000, which is in line with nationwide rent prices according to Zillow’s U.S. rental market tracker.

Although rent prices vary greatly based on location, the national average provides a fairly reliable gauge of how much renters can expect to pay in major metropolitan regions.

The study noted lifetime rent costs would amount to roughly $303,000 in places like Texas and $273,000 in Minnesota. At the other extreme, Hawaii tenants expect to pay a staggering $600,000 before buying a home.

The study results are consistent with a report from Creditnews Research, which estimated the typical American has paid more than $366,000 in cumulative rent since 2000.

While it’s easy to conclude that renters are throwing their money away, this view ignores the growing cost burden of homeownership.

Homeownership comes with a hefty price tag

A recent Creditnews Research study compared the costs of homeownership versus renting across the 100 most populous metro areas. With no exception, paying rent was much cheaper than owning a home.

Even in parts of the country with the most affordable housing markets, renting instead of homeownership was associated with monthly savings of between $567 and $895.

In the most expensive regions of the country, such as California, Hawaii, and parts of the Northeast, the monthly cost of homeownership was at least $3,332 higher than renting.

Unlike renting, homeowners are responsible for mortgage payments, homeowners’ insurance, property tax, and private mortgage insurance. Combined with rising utility bills, the costs of homeownership have increased substantially in recent years.

However, this isn’t to say that homeownership isn’t worth it. After all, Creditnews Research determined that homeowners accumulated an average of $376,722 in home equity over a 23-year period.

Owning a home can be an escalator to wealth for people who can afford the monthly payments and plan on living in the property for at least five years.

The challenge is that qualifying for a home has gotten much harder over the past two years.

Even with the most recent drop in mortgage rates, Americans would still be on the hook for more than $2,600 in monthly housing payments, assuming a 20% down payment on an average home.

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