I have been going back and forth with this lately, using the most recent available data, and I can’t make heads or tails of it. The answer depends largely on the assumptions you make about future interest rates and home-price appreciation.

At this moment, with mortgage rates in the upper 6% range, buying can be difficult to justify unless you expect to own the home for at least eight years. That’s a looonnnggg time. Maybe renting really is the better choice.

But what happens if mortgage rates fall by a full percentage point into the upper 5s?

Suddenly, the numbers look much better. The carrying cost of owning a home drops considerably. More importantly, you may be able to throw your conservative assumptions about home-price appreciation out the window.

I can tell you from experience that there is so much pent-up demand.  Every time rates even begin to go down, I get a flood of phone calls from buyers looking to get pre-approved.  No joke!   Also, as I have said before, sellers are a peculiar bunch: when they only have one buyer interested in the house they’re selling, they are relatively easy to negotiate with, especially after their house has been sitting on the market for a few weeks. But if they just get ONE competing buyer – just one – all of the sudden they think they are king of the hill, and they become much less likely to negotiate. So it’s pretty clear to me that lower rates would cause home prices to rise quickly – so much so that you’ll wish you could jump into the DeLorean and travel back to September 2026. 

So, if you think rates are going down, your options are:

1. Wait for rates to fall and then buy, thus getting a lower interest rate but paying more for the home.
2. Buy now, while no one else is buying, thus paying less for the home, and refinancing when rates go down.  Worst case, rates don’t go down and you have to wait for 8 years to break even (assuming you would want to sell at that point).  That does not mean you have to live there for 8 years; you could always turn it into a rental.  Still, the 3% or 5% you put down as a down payment would remain tied up in the property. 

Of course, those are only the quantitative considerations. A spreadsheet assumes that you don’t care where you live, how nice your home is, what the schools are like, or whether you can paint the walls without asking permission.  Also, no one would care if you got a second dog or your kids turned their bedroom door into a dart board. 

But people don’t experience a house as a collection of numbers. They experience it as the place where they live their lives.  Where their kids grow up, go to school, go off to college, and come back home to visit (and ask for money). 

It’s hard to make a rental house truly feel like home.