Rent vs Buy: By the Numbers

Rent vs Buy has become a hot topic as of late. With home prices still rising, interest rates remaining the same, the uncertain effects of tariffs on inflation, and the demand for homes higher than supply in most parts of the Greater Philadelphia area, many potential homebuyers are faced with the difficult decision of whether to buy or rent. A previous post highlighted the pros and cons to each, with money, time, emotional and physical wellbeing all important factors. Sometimes, it’s easier to see the numbers, so potential homebuyers can make the best decision.

(Disclaimer: Many articles and websites, including ones referenced, compare monthly rentals and sales to a period beginning around 2021, which was historically the largest spike in home sales and rentals in our lifetime due to a Covid market freeze followed by extremely low interest rates to stimulate growth. So the year-to-year numbers going back to 2021 will show dramatic declines in monthly rental payments and inclines in monthly mortgage payments, which fuels the spicy “generation of doomed homebuyers” narrative. There is a clear and obvious short-term financial advantage to renting in our area. The goal of this post is to provide information on the buy-rent gap, so anyone interested in real estate can make informed decisions.)

The sample properties compared throughout this article are 3 bedroom, 1.5 to 2.5 bath townhomes. Considered a starter home for most first-time buyers, a merging property for couples or friends, or a downsize option for empty nesters, these properties have been selected for their uniformity across a wide number of areas. The neighborhoods selected are located in Bucks and Montgomery Counties, where as detailed in another post about current local trends, home prices continue to go up in specific markets.

* The properties selected represent the number of homes rented with the specific comparable features (3 beds, 1-2.5 baths) within the past 180 days (unless noted). The total number of rentals closed is higher in every market.

Source: Bright MLS as of August 2025

* The properties selected represent the number of homes rented with the specific comparable features (3 beds, 1-2.5 baths) within the past 180 days. The total number of homes closed is higher in every market.

 # The monthly payment uses a 30-year fixed, 6.5% interest rate, 3.5% down payment, and $1,800 per year in Homeowner’s insurance. The payment also reflects annual taxes, mortgage insurance, and HOA (if applicable) for the specific neighborhood.

 Source: Bright MLS. Calculations from Fannie Mae

Referencing the two tables above, it’s clear that renting is cheaper than buying in each of the highlighted neighborhoods. This is a trend found in most markets around the country and with the exception of post-economic breakdowns, is typical in the rent vs buy conversation. However, most buyers want to know the differences in how each decision impacts their finances. Of the six neighborhoods, the average difference between renting and buying is $1,099 per month. Newtown Grant has the largest gap in monthly mortgage payment vs rent at $1,887 per month, a 48.5% swing. Wynmere Hunt has the smallest difference at $724 per month, or 24%.

According to Bankrate, in February, the national average per monthly mortgage payments was $2,768 versus $2,000 a month in rent, which equals a difference of $768 or 32.2%. Carriage Hill (30.9%), Village Shires (31%), and Windrush (31.5%) all fall within 2% of the national average while Saw Milly Valley (26.2%) remains below the national average. That’s two neighborhoods in Horsham Township where the gap between buying and renting is well below the national average. These neighborhoods are still well above the $1,590 per month average for Pennsylvania properties according Zillow, which shouldn’t be surprising.

Jiayi Xu and Danielle Hale, in an article for realtor.com, posted an update on the largest metro markets across the country that shows the buy-rent gap declining for 0-2 bedroom homes from this time last year. “In June 2025, the average monthly cost of buying a starter home in the top 50 metros was $908 (53.1%) higher than renting, whereas the cost of buying was $956 (54.7%) higher than renting in June 2024.”

Pittsburgh was the only metro area out of 50 where buying a starter home was more affordable than renting, but in the Philadelphia-Camden-Wilmington metro homes averaged $1,770 a month to rent vs $2,395 a month to buy, a difference of $625, or 35.3%. The article also claims the cost to rent has gone down 2.4% while the cost to buy has gone down 2.7%. However, this is one of the reasons why researching local markets becomes necessary because throughout the Philadelphia metro area, there are neighborhoods where the buy-rent gap is higher than the state and national averages and others where the gap is lower.

One of the main financial reasons why individuals buy a home instead of renting is because ownership helps build equity, which improves an owner’s financial power over time. One of the drawbacks to obtaining a mortgage is the amount of interest paid to a lender for borrowing the money to purchase. A potential buyer needs to give to receive, and when it comes to home ownership, each individual must weigh the overall costs of ownership. The total interest paid over time to build equity is very high, in the hundreds of thousands for each of the highlighted properties. The incremental shift of more money that goes towards principal and less toward interest each month, known as amortization, is a scale of numbers we don’t often look at when viewing our loan statements, but it is very real. 

* The monthly payment uses a 30-year mortgage with a fixed 6.5% interest rate and $1,800 per year in Homeowner’s insurance. The payment also reflects annual taxes, mortgage insurance, and HOA (if applicable) for the specific neighborhood.

 # Not including fluctuations in equity due to market changes and/or a reduction in mortgage insurance after reaching 80% of the property’s loan-to-value.

 Source: Bright MLS August 2025 and Bankrate

Equity represents one of the biggest differences between buying vs renting over time. Using the above examples, a buyer would build an average of $84,035 in equity in the highlighted neighborhoods after 10 years with 3.5% down and $148,836 in equity for 20% down. These numbers can change depending on the type of loan (conventional, FHA, VA), term of the loan (15-year vs 30-year, fixed vs arm), percentage down, and the time it takes to reach a loan-to-value percentage, usually 80%, when private mortgage insurance is no longer necessary. The numbers also change when the value of the home rises or falls, though more likely to rise in our current economy, and equity will increase at a greater rate as the loan reaches the end of its term.

During that same 10-year period, the renter will have attained $0 in equity.

No matter the decision, buying or renting has to make sense for the potential homebuyer, who must weigh the short-term and long-term pros and cons to make either dream scenario a reality. Experienced agents are available to help make either decision happen.

Feel free to contact me if you’re considering one or the other and would like a detailed analysis of your search area.