Buy vs rent if home prices fall first

Prices fall 8% and 6% in the first two years, stay flat in year three, then recover at 4% a year. A realistic stress test of the buying case.

After 10 years, renting and investing finishes ahead of buying by about $88,723. On these assumptions buying overtakes renting after about 16.8 years, once selling costs are counted.

Year-by-year results for this scenario

After 10 years, renting and investing finishes ahead of buying by about $88,723. On these assumptions buying overtakes renting after about 16.8 years, once selling costs are counted. The owner's first-month cash cost is $3,757, compared with $2,325 for the renter.

Net worth by year (nominal dollars)
Year	Home value	Mortgage balance	Buyer net worth	Renter net worth	Buying minus renting
1	$552,000	$469,303	$51,733	$150,940	−$99,207
2	$518,880	$458,120	$31,313	$175,252	−$143,938
3	$518,880	$446,428	$43,137	$199,529	−$156,392
4	$539,635	$434,203	$75,382	$224,305	−$148,923
5	$561,221	$421,423	$113,727	$249,933	−$136,206
10	$682,811	$348,248	$303,385	$392,108	−$88,723

Questions people ask

Does buying beat renting in this scenario?

After 10 years, renting and investing finishes ahead of buying by about $88,723. On these assumptions buying overtakes renting after about 16.8 years, once selling costs are counted.

What changes in this scenario?

Prices fall 8% and 6% in the first two years, stay flat in year three, then recover at 4% a year. A realistic stress test of the buying case. All other inputs keep the calculator’s default planning values.

Is this a forecast?

No. It is an illustration of how one assumption changes the buy vs rent comparison. Replace the inputs with your own numbers.

Other buy vs rent scenarios

Educational illustration; not advice. See the assumptions.