Should You Buy Or Rent In 2026? (The Numbers SHOCKED Us!)

Introduction – The American Dream Question (0:00)

Brian: Owning a home has long been considered the American dream, but a lot has changed over the past decade, and some actually are now saying it’s smarter to rent than to buy.

Bo: Brian, I am so excited because today we’re actually running the numbers to see if it’s financially better to buy or to rent in 2026. And we’ll talk about how to decide which path is right for you.

Brian: So, I’m Brian, he’s Bo, and we’re financial advisors here to help you make the smart choice with your money, your housing. And with that, let’s jump right in.

Bo: So, Brian, I feel like this has been a hot topic on social media for a while. Should I buy or should I rent? Because you’ve already alluded to this, that buying a home and being a homeowner in this country was often considered part of and even a necessity to be following the American dream.

Brian: Well, and that’s what I worry is it’s become such a part of our societal fabric that you have your parents and your grandparents telling you you got to go buy a house, that it’s not that cut and dry anymore. There’s a lot that’s got to go into this. Now, that’s not to say in the long term we still don’t love home ownership, but I’m saying don’t skip the steps. And that’s what we’re going to give you today is these steps so you can figure out for your personal situation. Is it better to buy or is it better to rent at this moment?

Bo: And it’s so emotionally charged because you’re hearing those parents and grandparents telling you, you got to buy, got to buy, got to buy. And meanwhile, the housing market’s getting crazier. We’ve had interest rates run up. We’ve seen the cost of housing increase. And so, a lot of people, especially first-time home buyers, believe that this is almost an impossible task. Something that they aren’t even capable of doing. And if I’m not capable of doing it, well, does that just mean that I’m destined to not be able to build wealth?

Brian: Yeah. And this is when I want to make sure that all my financial mutants, that we give you the field vision to make the right decision so that you can kind of know what’s going on in the economy, what’s going on with you and your personal finances and you come out on the right side of this and actually know how to navigate.

How Did We Get Here? (2:05)

Bo: So the question we have right now is okay, how did we get here, right? Like what’s going on out there? And look at some of these headlines that we’ve seen from finance and economics. Is it better to rent or buy? Rent versus buy in 2026. Which is cheaper in today’s housing market? People should rent, bro, says real estate investor Grant Cardone. There’s no real money in owning a single family home compared to the S&P 500. So, it seems like a lot of people are tooting this horn saying rent, rent, rent, rent. Is that now the responsible decision that people ought to be making?

Brian: I mean, and just how did we get here? I think it’s important that we actually kind of level set and talk about where is housing actually at in 2026. Well, check this out. The median sale price of an existing home in February of 2026 is right under $400,000.

Bo: Yeah, but we have to have some context. Okay. Well, how does that compare in relative terms? And if you look at this, this is the median sales of houses in the US from 1965 until now. And you can see that there is sort of like this steady increase. There’s this steady runup. But there was this really unique thing that happened coming right after the pandemic, right after 2020 where housing prices skyrocketed, hitting sort of an all-time high right there in that 2021, 2022 timeline.

Brian: Yeah. I mean, actually, if you look at the visual, because I know we have a lot of podcast listeners, too, it is literally the hockey stick. I mean, you watch this thing just spike up. That’s why you saw markets, a lot of places, a lot of houses went up close to 50% over a 2 to 3 year period. But you are now, if I’m just giving you the rest of the story, but look how we’re still trying to figure out where the market is because you have seen it kind of cool off. You’ve seen median sales prices coming down. There’s a lot going on with this graph.

Mortgage Rates and Affordability (4:00)

Bo: So, it’s not just home prices, though. Also, if we actually look at mortgage rates, current mortgage rates right now are around 6.4% for a 30-year conventional loan. And so again, we have to think about this in the context of history. How do these mortgage rates look to historic mortgage rates? So according to Freddie Mac via the FRED website, if you go back to 1975 till now, you can see really from the late ’70s, early ’80s, we’re in this sort of declining mortgage rate environment. It kind of bottomed out again right there after the global pandemic. We sort of hit all-time lows on mortgage rates. Now, since the pandemic, another hockey stick, it kind of jumped right up as soon as we got outside of 2020, 2021.

Brian: Yeah. I mean, what a haves versus have nots on affordability is that you see the interest rates were the lowest of low right after 2020, but then when we cut the spot off, I mean, they jutted up to where now mortgage rates went, you know, over 7.5%. But we’re coming down. I mean, so that’s what I mean. There’s a lot that has happened over the last 5 years. And it’s crazy to apply old rules to something when you’ve had such huge changes. And that’s what we wanted to make sure we educated our audience is you need to know where we’ve come from. So you don’t apply old rules to something that’s still processing through the system because you might find yourself stuck in a bad situation. And if you want to know how much interest rates matter on this decision-making process, I want you to consider this. For a $400,000 home that you put down 5%, if you had the pre-pandemic 3% interest rate, for some people, like I was asking around the room, there’s some people who have under 2.5% mortgage rates, but we just said, “Okay, let’s choose 3%.” It’s $1,600 a month. Fast forward that to now to 6.4%, which is pretty close to where we are right now, it’s close to $2,400 a month. That means the cost of your principal and interest only has gone up close to 50% just in the last few years.

Bo: Yep. So the cost of housing has increased. The interest rates have increased. And then there’s one other metric that we want to look at and that’s housing affordability. What’s the relationship to the cost of home ownership relative to income? Like how much of an individual’s income is represented by housing costs? And so if we kind of just look at this again through time from 2005 until now, and we say, okay, was the cost of housing greater than or less than 30% of the median household income? And if it’s greater than 30%, or on the chart if you’re looking at it right now, if it’s orange, we would argue that housing is not incredibly affordable. But if the cost of housing is less than 30%, we say, okay, that is an affordable housing era. Well, you can see again post pandemic after 2021, we have been in a pretty unaffordable housing metric.

Brian: Well, we were like, okay, let’s not just take the Federal Reserve’s data. Let’s actually do our own calculation of this. So, we actually took housing affordability in 2026. We said, “Okay, the median household income for the United States right now is a little over $85,000.” The median home price in the United States right now, right around $391,000. Interest rates currently 6.1%. Median monthly principal and interest payment right at $2,100. If you take the median monthly total payment, that’s principal, interest, taxes, insurance, and PMI, it’s right under $3,000. It’s $2,926. So, if you do the math on that, the share of median income is 41%. Now, realize we like 25%. The Federal Reserve was using 30%. And here we are showing you just using the current trends of where median numbers are in the United States, we’re at 41%. And so yes, I would say housing, the affordability of buying houses is really low right now.

Bo: Yeah, home ownership is expensive. But in reality, so too is renting. So too is the other side of the equation. If we look right now, the national average for rent across the country right now is $2,000 a month. And if you’re going to be a renter, again, you want to be a responsible renter. If we look at just the average cost of rental insurance, it’s about $13 a month. So these costs stack up. You’re somewhere between $2,100 and $2,200 on average to pay for rent. Well, when you think about that and we look at the actual data, 50%, one in two households that rent say that they spend more than 30% of their income on housing. These aren’t homeowners. These aren’t people on the equity side. These are people that are renting. So both of these, both home ownership and renting are pretty expensive right now.

Brian: Well, and we even went even deeper into the data and we said, “Okay, let’s look at this from an annual basis and then bring it all together because we said all this in the last 5 years is when all this got really crazy and sideways.” We just did year-over-year national average rent increases. And you can see from 2020 to 2021 is about 6% increase. 2022 from 2021, 8%. 2023 from 2022, 6%. 2024, 4%. If you bring all these together, 31% increase. Now here’s what’s wild to me. 31% is a lot. It’s a lot. But if you can believe it, home ownership is even more. I think I told you that stat that housing has gone up close to 50% for most people. If you look at just what interest rates have done, if you look at what the cost and appreciation through this post-inflationary period, it’s gotten a lot more expensive. So now this leads to the ultimate question that we opened this up with. What’s better? Is it better to rent or is it better to own?

The Ultimate Question: Rent vs. Own (9:58)

Bo: Yeah. What is the better choice? What’s the optimal choice? And what’s interesting is even though they’re both expensive, home ownership is expensive and renting is expensive, under our current conditions, where we are right now, the delta in a number of markets between buying and renting is pretty substantial. Pretty significant. And I would argue significant enough that we should not ignore that.

Brian: Well, look, I don’t even mind because I got to think it’s hard to build consensus in anything because there’s just variability. I mean, especially United States is huge. So, it’s hard to say this city is the same as this city. But check out this stat. On average renting a home was cheaper than paying a mortgage in all 50 of the largest US metros in 2025.

Bo: Say that again. Renting was cheaper than owning in every single top 50, 50 largest.

Brian: Now, now look, I get nervous because when you say this stuff, people are going to be like, “Well, I guess that means rent.” It’s like the headline said, “I guess rent’s better.” Hang on, miss. Don’t mis-hear because your personal financial situation is going to be very personal. We’re going to give you the tools, but we think that we first need to go at least lay the groundwork and give you an understanding. I do think that earlier, remember how I was talking about, yes, rent has gone up 30%. But housing’s gone up more. There’s actually a great chart on this because we wanted to show one more piece of data to get you educated on this. If you look at mortgage affordability versus rent, you can see the separation in the line right here. We did this from 2010 to 2024. The hockey stick is just bigger with mortgage payments, the average mortgage payment, how much it’s jumped up versus what happened to rent. And that makes a lot of sense. And I don’t mind just telling you guys behind the curtain. A lot of people who are renting you these houses, they have sub-4% mortgages. They bought these houses pre-2021 so they can give you a more affordable rent than somebody who’s actually going out there and setting up a new transaction and buying the house and having to pay the higher interest, pay the higher purchase price. That’s why mortgages are so much more expensive right now.

Bo: Yeah. If we think about this on the national level, on average mortgage payments were 38% more per month compared to rent. So 38%. So the question you have to ask is in relative terms how does that stack up? Well if we go back to 2010, so just 15 years ago, 16 years ago, it was only about 18%. Yeah. So the chasm, the gravity, the difference between the two is huge. But again, it begs the question, which one is better? Because just because renting is cheaper doesn’t necessarily mean it’s better. But it does mean if there’s a huge gap between the two, we ought to assess that. We ought to analyze that. We ought to make a wise decision in the current context in which we’re living.

Case Study: Heather the Homeowner vs. Randy the Renter (13:03)

Brian: And you know, Money Guy show, we love a good case study because we wanted to show you, hey, let’s actually put some numbers to this because if we’re going to break the American dream and tell you that renting is better, let’s at least show you how these numbers play out and how razor thin this can actually come to. You know, a lot of times we tell you and I’ll cover this a little bit later. Reversion to the mean is a real thing is that we’ve had so much of this has happened in the first five years of this decade that you can’t expect that this is not going to have some impact on future. So, we actually when we were putting together this case study between Heather the homeowner and Randy the renter, we put that inflation, because you still got to take into account inflation, but we did like 2% on mortgage. You know, we think that homes will appreciate around 2%. And I even think that that might be rosy because if we had houses go up 50% in the first 3 to 5 years of this decade, it’s easy to see. You saw it in that chart where it was actually coming down a little bit. I don’t think you can expect that you’re going to make a gazillion dollars on your house for the next 3 to 5 years because it’s going to kind of level set or reversion to the mean or getting back to some normalcy will happen.

Bo: All right. So, let’s think about these two individuals. Heather the homeowner and Randy the renter. Both are 35 years old, but they’re both going to make unique decisions. Heather decides to buy a home and Randy decides he will rent an equivalent sized home. They’re both going to go with a three-bedroom house and we’re going to assume that the cost of utilities is roughly the same. So, let’s look at the financial implications of both of these. Starting with Heather, she’s going to buy a home and it’s going to cost a little over $343,000. She puts 5% down. She’s going to put down a $17,000 down payment. Her closing cost, if we assume 1.5% of the purchase price is going to be another $5,100. So in total, she has about $22,000 of upfront costs. And when we calculate her mortgage payment, so the principal, the interest, the taxes, insurance, PMI, it’s going to come in right around $2,900 a month. So she’s got $22,000 out initially and about $2,900 a month in a monthly payment. Now, let’s look at Randy. Okay, Randy has to fill out a $100 application fee. He’s going to make a security deposit. Now, look, I know that security deposits are often refundable. We’re going to assume that Randy doesn’t take care of the place, so that’s just a sunk cost. So, his total upfront costs are about $850 and his monthly payment when we take the average cost of rent for a three-bedroom, and we add to that the cost of renter’s insurance is going to be about $2,200. So $850 out initially and a $2,200 monthly payment.

Brian: Well, I mean, right off the cuff, you can see that Randy is going to end up, he’s saving close to $21,453 out of pocket because he’s just coming up with security deposit. You know, think about she was having to come up with the down payment, the transaction cost, and all those other things. That’s a big difference. There’s also the monthly payment. Randy’s cheaper. And now look, a lot of you are gonna be like, “Yeah, but the thing with rent though is it’s going to go up over time. At least Heather’s gonna be locked in on her mortgage payment, so she’ll be okay.” Okay. But you have to be careful. Remember, we’re talking about you got a 20% premium on home ownership versus the rent. There’s probably a lot of play that can come from that.

Bo: So, let’s see what happens because remember Randy, he’s going to invest those initial costs and he’s going to invest the monthly savings. And we’re going to assume that they both do this for 12 years. You may be asking, okay, why, Brian? Why 12 years?

Brian: Well, we did some math because look, how long do people stay in houses? When we looked it up, the data point came in right around 12 years. And we’re like, well, look, these are unique times instead of just doing a normal case study where we do 20 or 30 years. I feel like that wouldn’t be really representative of what’s going on. So, we said, let’s base it on how long people stay in houses if they did this transaction. Right now, it’s around 12 years. So, let’s do a check-in point at that 12-year mark.

Bo: All right, so let’s look at Heather after 12 years. Remember, Brian’s already mentioned that because we came through this rapid increase in home prices, we’re going to assume that her home, the one she bought, is going to increase about 2% per year. So 12 years from now, it’s going to be worth about $435,000. And her monthly payment, her principal and interest would have stayed the same. That’s one of the benefits of having a mortgage. Those are locked in. But the taxes are likely going to increase and the insurance is likely going to increase. And so we just assumed, okay, what if those also increase at about 2% annually? So after this 12-year timeline, Heather will have spent a total of $455,000. But when you look at the equity she was able to build in her home over that time, she has about $166,000 of equity. That’s how much wealth she has built. And her current payment when you factor in the increase in taxes and increase in insurance is a little over $3,100 a month.

Brian: All right. So that’s where Heather is. How about Randy?

Bo: Yeah. Let’s check out Randy after 12 years. We’re going to assume that Randy was able to earn 8.5% on average on his investments. We just took the wealth multiplier for a 35-year old. So the lump sum that he put to work as well as the monthly difference he put to work. We are going to assume that his rent increased. It also went up at 2% per year in the market in which Randy lives. So after 12 years, Randy has now spent a total of $357,000. But when you look at the value of the portfolio he built up, it’s worth over $198,000. And his monthly rental amount because of those 2% increases is just a touch over $2,700 a month. So, when we compare these two, what do you see? Well, Heather spent about $100,000 more. And yet, even though she spent $100,000 more, the total value of her assets, total wealth that she’s been able to build is about $30,000 less. And her monthly carry cost, what she’s having to spend on a monthly basis to stay in the house is actually more than what Randy’s paying.

Brian: Well, this is what was so unique to me is that you fast forward 12 years, she’s still paying more than he is to be a renter. And then the fact that, because we always think home ownership is going to be the winning factor. Well, assuming, now look, that’s a big assumption because Randy would have to be a financial mutant. He’d actually have to be investing the difference. But if you’re looking at absolute dollar for dollar just matching these, it is amazing that Randy is going to have close to $200,000 of assets that he’s going to be able to have access to to make other financial decisions. Meanwhile, Heather, yes, she has $166,000 of home equity, but it’s going to be illiquid. That’s right. And she’s still going to have a mortgage of about $269,000. So, in a lot of ways, Randy’s going to have maximum flexibility. If you want to know who the clear winner is, I have to say, and it surprises me because like I said, in the societal fabric of America, homeownership is the goal. It’s the dream. So, it breaks my heart to say, “Hey, look, maybe this time is different.” Who is better off in this scenario? Now realize I’m going to give you some warts on this scenario in a minute, but Randy is the clear winner.

Bo: Yeah, but this changes, right? So Randy won in this unique scenario, but there are other variables like what are each of their time horizons? What location do each one of them live in? What are their ultimate goals? It’s really, really difficult to say specifically who is the winner in the scenario. And we’re looking at it at a finite matter of time because when you play this out over 30 years or over an entire lifetime or with changing variables and circumstances, it could look very different. What I took away from this is I don’t think that either of them are necessarily losers. Both of them were able to build wealth. It’s not like Randy renting put him behind the eight ball.

Metro Areas with Widest and Narrowest Gaps (21:09)

Brian: Well, I think look, we went even deeper because I wanted to really nerd out. If we’re going to make these assumptions and break this American dream, you better do your homework and measure twice. And so, we had pulled up the 10 metro areas where rents are very low relative to the home prices. And we’ve experienced this. We’ve had several clients, especially out there. Think about like Silicon Valley, San Francisco, and other areas, high cost of living areas where we’ve known people who’ve built wealth in these communities. When they retire, they move away and that’s when they actually buy. And look at this chart of these 10 communities where you have a huge gap between the rent versus buy. You’re paying a much higher premium to buy in these markets. Might make sense if I lived in one of these, you know, areas or these metro areas. Probably going to just go ahead and not fight the momentum we’re in and just rent.

Bo: So the widest gap, the 10 that are listed here, San Francisco, Bridgeport, Connecticut, New York, San Jose, California, Los Angeles, Honolulu, Houston, Texas, Seattle, Washington, Providence, Rhode Island, and Boston, Massachusetts. If you live in or near one of those metros, there’s a really good chance that it might make more sense for you to rent than to buy. Okay?

Brian: And then now, let’s flip the script. We say, “Okay, what has the least amount of gap, the narrowest gap between renting versus home ownership?” And check out this list because this is one where you might want to hold your nose. Yes, you’re going to pay a premium when you buy the house, but it’s closer to the rent than versus home ownership. So, Phoenix, Arizona is number one. Orlando, Florida is number two. Columbia, South Carolina is number three. Daytona, Florida and Boise, Idaho are tied somehow at number four. Number six is Cape Coral, Florida. Seven is Las Vegas. Number eight is Greensboro, North Carolina. Number eight, also another tie. Number eight is Grand Rapids, Michigan. And then 10 is Charlotte, North Carolina.

Bo: So at the end of the day, the decision to rent or buy is a very personal decision for you based on the specifics of your situation, but also even though it can be personal and even though it can be based on your unique variables, one of the things that you have to take into consideration and you can’t ignore even though personal finance is personal is that location matters. And when it comes to real estate and when it comes to whether you buy or whether you rent, the location in which you choose to do that has a huge impact.

Variables to Consider in Your Decision (23:31)

Brian: Yeah. So let’s go ahead. I want to give you the variables because I hate a show that you watch and you know, well, how does this pertain to my situation? Well, this is where the rubber meets the road. The first thing is I think you have to look at your location and say and do an assessment. How hot or cold is this market? And an easy way you can, if you need a data point is go look at how long houses are sitting on the market. You can see days on market to kind of tell you and you can use that to help figure out is this a hot market? Is this a cold market? Because it is going to vary across the country.

Bo: Another question to ask is what are the other unique economic influences that are taking place? Are there a lot of businesses and a lot of jobs moving into the area making it more desirable or is it an area where there are a lot of businesses and jobs moving away from the area? You want to make sure you’re aware of that before you make the decision to plant your flag and stay in that area.

Brian: And then we put on here, look, what’s the quality of life in your area because not all communities are created equal on quality of life. If you know, if it’s true that we’re in this new crazy paradigm where robots are going to start doing the work for us and all these other things and we can live wherever we want. If you looked at your community, is it going to be a net winner from this situation where people are going to move here regardless of jobs and so forth or is this going to be a net loser? I think you have to take into account what is the quality of life in this community.

Bo: Now, one thing you found, Brian, because a lot of people probably watch this. Okay, well, how do I know? How do I compare? There are some great tools out there. One that you and the guys found, you found the Redfin buy and rent calculator. Tell me a little bit about this calculator.

Brian: Yeah. So, what you can do is you can go and you can use this because, you know, it’s not uncommon that a lot of these real estate websites will tell you what the rents, estimated rents are going to be based upon how many bedrooms you have, how many bathrooms, and you can go look at the rent and then this great tool that I really we played around with it within the content meeting from Redfin. Then you can look at the purchase prices in the area. You can go ahead and do the math, not just, you know, stick your finger in the air. Let’s actually do the mathematics to this so you can compare. And what I liked about the calculator is when you typed in the zip code you’re looking at, it would adjust the property tax calculations. It would adjust the insurance because those things do matter in the areas that you’re going to be buying.

Non-Financial Considerations (25:44)

Bo: Now, but you have to remember, right, money is nothing more than a tool that allows us to accomplish the goals that we have. So, we’ve given you all kinds of like financial metrics and money things to think about, but there are also some non-financial considerations you want to make when it comes to choosing where you want to live and how you want to live there. So, here’s some questions to ask yourself. If I could work from anywhere, if I were able to go completely remote, would I still choose to be in this area? Or am I only in this area because I’m tethered to a job that I may or may not be in five, six, seven, eight years from now?

Brian: Well, and because we know that these decisions are much bigger, you know, the room for error or you to be stuck could be much higher than it’s historically been. So that’s why the next question is, is this where I want to raise my family? Because you know, a lot of people you buy a house, instead of this being a three-year, five-year, this is probably going to be a 7 to 10 year type thing because it’s going to take time to smooth out the transaction, you better go ahead and start looking at is this where I’m going to be okay with raising the family. And then that leads to the next question. Is this going to be my long-term community that I’m actually going to be setting roots in?

Bo: Yeah, we talk about this all the time, Brian. A lot of communities are somewhat transient by nature. You think about a lot of college towns. You go there and you live there and you fall in love with it, but you recognize if you decide to set roots there, it’s a constantly changing population. There are always people kind of coming in and moving out. You want to figure out, is that a community that I want to be in? Is that where I want to set my roots if it’s going to be more of a transient or more fluid population of folks coming in and out?

Brian: And then we felt like this was important to put the last one there because sometimes because these are non-financial, sometimes things are just so big they’re going to impact your life. And the big influences that will overpower analytics is look, if this is where your in-laws live and you know that your spouse wants to live in this area, that’s probably going to make some things happen even if it’s financially got some headwinds to it. The other thing is, are there what’s called location gimmicks? Meaning, is there an ocean in your community? Is there a mountain? These are the things that, you know, you’re just going to be like, gosh, I hate that I’m paying a premium for this, but this gimmick is big enough that it’s actually going to overwhelm the analytics of my calculation.

When Home Ownership Might Win (28:05)

Bo: So, if you’re standing here at this crossroads trying to decide, let us give you some tips and some pointers. Home ownership, actually buying might win, might be the desirable choice if you have a family, especially if you have school-aged children and the school district in which you live really, really matters. Or it might win if you value stability over flexibility. You want to set roots and you want to be firm. Or if you happen to have a remote work situation that allows you to live anywhere that you want. I’m not tethered to one geography, one place that might lean you towards home ownership. Or finally, if you can afford to pay the premium, even if home ownership is more expensive than renting, but for all of the reasons that we’ve listed out that is attractive to you and you can afford it, then home ownership might make the most sense for you.

Brian: Yeah. I mean, if money’s only a tool and if your quality of life exceeds this and you’ve done a great job being a financial mutant building up, you might be able to overcome the premium and just hold your nose and make it happen.

When Renting Might Make Sense (29:15)

Brian: Now, that was the home ownership might win. Let’s talk about when renting might make sense. I’m looking at a lot of you young people out there. If you’re early in your career and look, you might need some flexibility on where you’re going to live just in your journey. I don’t want you to be trapped because you made a housing decision that keeps you from living your best life. It’s going to help you out if you have maximum flexibility. So that’s why if you value flexibility and be able to live life on your terms, renting is going to be okay in a lot of ways, especially since you’re not having to pay the premium to own this decision. And then, you know, we kind of already have covered this, but it’s worth repeating it. If you live in a high cost of living area where it is a high ownership premium because it’s much, much cheaper to rent in the area because it’s such a high cost of living, then you need to take that into account because like I said, we have lots of millionaire clients who will build wealth in these high cost of living areas but they don’t actually buy their first home until they retire to the lower cost of living area that they’re going to spend in their retirement era.

Financial Considerations (30:15)

Bo: Okay. So you’ve kind of assessed okay which one of these camps do I fall into, now what is the financial triage I need to think through? What are the financial considerations? And one of the very first ones especially on the home ownership side, how much upfront cash do you have or if you want to be a homeowner how much do you need? If all you’re sitting on is your step one deductibles covered or maybe you’re just working through getting step four emergency reserves, you’re probably not at the place where it makes sense to buy the house. Because don’t forget, there are other costs besides just the down payment. There are closing costs and furnishing costs and moving costs. If you don’t have the cash available for those things, you might be putting yourself in a precarious situation.

Brian: There’s also what’s your time horizon? I mean, look, we’ve always thought housing was a 5 to 7 year decision. And so if you’re somebody right now, you say, I don’t know if I can promise myself I’m going to be here for the next three years, 5 years, that’s going to lend you more towards the rent cycle of things. But if you can say, hey, no, this is where I’m going to raise my family. I’m going to be here for the next decade and beyond, then long-term probably is going to move the needle closer to the buying. So definitely pay attention to the time horizon.

Bo: And then the other thing is what is the true monthly cost? Not just okay I saw what the rent was on the brochure or oh I know what the principal and interest is going to be. Don’t forget that there are other costs. There are costs like property taxes, insurance, maintenance, HOA fees, utilities. You want to make sure you have a very realistic understanding whether you’re going to go the ownership route or whether you’re going to go the renting route to what the actual monthly burn is going to be for you. And you want to make sure that monthly burn fits inside the appropriate budget metric for you.

The 3/5/25 Rule (32:05)

Brian: Yeah. And all this is kind of if you want to bring this to boil it down to a really good decision matrix. We have the 3/5/25 rule. One of the things I’m most proud of, we didn’t have to amend our rules just because we’ve hit this crazy cost of living time is that we’ve been one of the people on the mountaintop screaming don’t put down 20% on the first house. It’s okay to get on the home ownership train if you get creative and put down 3% to 5%. That’s what we did when we bought our first homes. Now, this is only on your first home. We want you putting down 20% on all the next homes when you’re upgrading. But that first home, it’s okay to put down 3%. You’ve got to be in this house for at least 5 years. And then I would love the ideal is if you can keep your monthly cost below 25%. I know that’s much, much harder especially in light of all the data points that we shared, but it is something just in the long term and that’s why I’m hoping that as you grow in your income that in the long term you can hopefully keep housing at an affordable range so you’re not house rich and life poor.

Bo: Now, if you calculate these parameters and you run through 3/5/25 and then you begin to look at the inventory of houses available in your area and nothing fits this, like you cannot get it to fit in or near 3/5/25, then you’ve got two options. Option number one is rent. And I think we’re laying out the case that that’s okay. Could be an okay permanent solution, could be an okay temporary solution. Or option number two, you could look at moving. You could look at getting creative and moving to an area where you can find something inside that 3/5/25 rule. But the rule is there for a reason to prevent you from making a financial decision that makes it impossible for you to build wealth otherwise.

Landing the Plane: The Bold Truth (33:53)

Brian: So let’s land the plane on this. It’s ultimately back to the question of is it better to buy or rent in 2026? And it’s definitely personal and it’s going to vary from people, but I don’t mind being bold and saying that for a lot of you out there, renting is probably, we’re breaking the tradition of saying that buying is the ideal because I think that you have to, you know, pay attention if you’re paying a premium right now for something that’s going to work against you in your long-term success. And I want to be bold enough to tell you as a financial mutant, you might need to change your field of vision. So, you’re actually looking for the best opportunity for your army of dollar bills. And for some of you, it’s going to be playing the arbitrage of renting while you save and build in the background. So, you then choose your shot on when is the right time to buy.

Bo: Okay, Brian. But, but this whole thing, you’re forgetting something, right? We’ve left something out here, and I can already hear the comments rolling in. Guys, what about building equity? I’ve always heard that if you look at it, homeowners are wealthier than non-homeowners. People who buy a house, people who get on the ownership side, they end up in a better financial situation than people who don’t. What do you guys say to them?

Brian: And I will tell you, when we look at the Federal Reserve data on typical Americans and their net worth, it is all home equity because the typical American is absolutely horrible with saving and investing and living on less than they make. So they are forced to build wealth only through the home that they bought at affordable prices. But realize what we talked about earlier. Right now you are paying a 20% premium to buy over rent. And I’m telling you, as a financial mutant, use that arbitrage, use that delta to actually not only rent, but you can then be a financial mutant and build up that 20% to work for you as your army of dollar bills. Because remember, past performance is not necessarily indicative or a guarantee that you’re going to have future success. So, I would be misleading you if I didn’t tell you, hey, we have a unique moment in time. As your educator, as your fellow financial mutant, if I don’t tell you these are the things you need to be paying attention to, I’m not doing my job to tell you you have to think differently than the herd. If you think like the herd, you just get trimmed out. You’ve got to thin the herd and think like a financial mutant.

Conclusion (36:25)

Bo: At the end of the day, we love home ownership. We also love renting when that’s what makes sense. What we really care about is you as a financial mutant being able to optimize your dollars. We don’t want you to assume that if I choose to rent, I’m throwing money away or I’m giving up on the American dream. But rather, if you determine and discern that renting is what makes the most sense for you right now or perhaps even makes the most sense for you forever, that’s okay. That’s the way that you as a financial mutant are exercising and optimizing your dollars and making personal finance personal. Don’t let someone else tell you that that’s not okay because they are not you.

Brian: And realize the law of accelerating returns. We’re in a huge innovation period right now. In addition to you investing, you’re going to be able to get hopefully a lot of alpha, a lot of performance out of being an investor with all this technology. And don’t short change that that innovation and technology is not only going to give you a great investment return. There’s a potential through automation, through robotics, through AI and the things that’s going to allow us to make even additional breakthroughs in construction. There’s potential that we could disrupt the cost of construction by 15% to 30%. There’s a chance that we could make building houses 50% faster than they’ve been in the past. We don’t know what’s coming down the pipe in the next 5 to 10 years. It’s going to change this equation. But what we have to think about is where are they right now and how do we live our best life? And that’s why we try to give you the tools. If you go to moneyguy.com/resources, I want you to go use our home buying calculator. I want you to go through our home buying checklist. We have a whole hub so you can feel like you’ve measured twice, cut once on this very unique thing so you can live your best life, come out the other side as a financial mutant, and not only live in the community you’re supposed to, but have an army of dollars so you own your time that much sooner. I’m your host, Brian, joined by Mr. Bo. Money Guy team, out.