Why It’s So Much Harder to Decide Whether to Rent or Buy

The median age of a first-time homebuyer in the U.S. has reached 40, up from 29 in the early 1980s, according to the National Association of Realtors. In Toronto and Vancouver, benchmark home prices are now eight to ten times the median household income. Much of the standard financial advice still assumes people will buy a home in their late twenties or early thirties, build equity, and rely on appreciation over time. For many households in both countries, that path is no longer realistic.

First-time buyers made up just 21 percent of U.S. home purchases last year, the lowest on record. The national home-price-to-income ratio now sits above 5.0, well above the 2.6 level considered affordable by most experts. And since 2019, home prices have climbed 53 percent, while median household income has increased by 24 percent. For buyers who were close to purchasing a home five years ago, the gap between savings and prices has only widened.

What people are actually doing

Households have responded in a range of ways.

The homeownership rate for U.S. millennials is 55.4 percent in 2025, up slightly from last year but still below the rate for boomers at the same age. Most millennial buyers are older and often receive help. According to a 2025 Redfin survey, about 20 percent of recent millennial buyers used a cash gift from family for their down payment, averaging $32,000. Another 20 percent sold stock investments, and 13 percent withdrew funds from retirement accounts. Instead of a steady climb up a housing ladder, many buyers now spend years gathering resources from different sources to make a single purchase.

Many millennials who continue to rent have shifted their focus away from homeownership. The stock market has become the main way younger households build wealth. 58 percent now believe stocks will deliver better long-term returns than real estate. Millennials and Gen Z are more likely than older generations to invest in individual stocks, REITs, and other speculative assets, and to prioritize long-term capital growth over buying a home.

The wealth gap this creates

Renting and investing requires more discipline than homeownership, which builds equity automatically. Mortgage payments reduce the principal, and appreciation adds to the value over time. Homeownership acts as a forced savings plan because missing payments puts the property at risk.

In 27 of the 50 largest U.S. metro areas, renting costs less each month than buying. This offers flexibility, but homeowners still build much more wealth. The median net worth for owners is $430,000, compared to $10,000 for renters. Even when renters invest the same amount as a down payment in the S&P 500, homeownership leads to higher wealth in about 80 percent of cases, based on recent models. That probably doesn't tell the whole story, though.

Leverage is a key factor in the wealth gap. With a 20 percent down payment, a 4 percent increase in home value results in a nearly 20 percent return on the initial investment. While stocks can offer higher long-term returns, most renters do not invest the money they save by renting. Instead, those funds are often spent on other expenses.

The non-financial benefits of homeownership

It's important to remember the non-financial benefits of homeownership, including stability, control, social identity, and community involvement. Homeowners tend to move less often, feel more secure, and develop stronger connections to their neighborhoods.

Renters face uncertainty because landlords can sell, leases can change, or rents can increase without warning. Homeownership does not remove financial stress, but it provides more stability and predictability. Many people value this security as much as financial returns.

So what is the new path?

Households that buy homes are doing so later, often with help from family or by selling investments. Many now see their first home as both a place to live and their main retirement asset, not just a starting point for future moves. Those who continue renting are putting more money into equities. And more people in both groups are moving to cities like Pittsburgh, Cleveland, and St. Louis, where home prices remain more affordable relative to income.

The decision to rent or buy has always been personal, but the factors have changed. It is now shaped by location, income, and access to family support. Two households in the same city with similar incomes can make different choices, and both can be reasonable.