--- title: "America's renter generation is trying to build -2-" type: "News" locale: "en" url: "https://longbridge.com/en/news/297788032.md" description: "Analysis suggests renting and investing may outperform buying for young, high-income earners due to current housing market conditions. With median rent significantly lower than monthly mortgage costs, saving the difference in the stock market can yield comparable or greater wealth over 30 years. However, this strategy requires consistent investment discipline and is less viable for low-to-moderate income renters facing affordability challenges." datetime: "2026-09-02T12:40:30.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/297788032.md) - [en](https://longbridge.com/en/news/297788032.md) - [zh-HK](https://longbridge.com/zh-HK/news/297788032.md) generator: "portal-rs" --- # America's renter generation is trying to build -2- A renter who is only saving, say, an additional $100 per month to invest would not keep pace with the equity they could build as a homeowner. But if they can save at least an extra $500 per month, "then we have something to work with," depending on the renter's financial goals and timeline, Clifford Cornell, a financial planner at Bone Fide Wealth, told MarketWatch. This approach works best for those with good incomes who start young, giving their investments the most time to compound. It is also contingent on the rental market in their area being cheaper than the homes for sale. The good news for young tenants today is that, for the moment, the housing market is better for renters than it is for homeowners. Home prices shot up during the pandemic and the median rent is now less than the median monthly cost of buying a starter home in all of the country's 50 largest metro areas, according to an analysis by Realtor.com, which shares a parent company with MarketWatch. And the gap is big: The average cost of renting a starter home is now $1,669, or 35% ($920) less than the $2,589 average monthly cost to buy a starter home. Here's an extremely simplistic illustration to see how the rent-and-invest versus buy numbers could play out today, using a calculator provided by Moody's chief economist Mark Zandi: A 35-year-old buys a starter home. They put down 10% for a $340,000 home with $2,600 in monthly costs, including a 30-year mortgage with a 6.1% interest rate, taxes, insurance and maintenance. Assuming 4% appreciation, at age 65, they'd have a paid off house worth $1.1 million, on top of any retirement savings. Brennan Drolet is focusing on his financial investments, which have performed better than the housing market so far. Now, let's say the same 35-year-old had rented a starter home instead - one that they like and will stay in - at the average cost of $1,669 per month, increasing 3% annually. They would invest the difference (by not buying) into the stock market, which would be roughly $1,000 per month in year one, for the next 30 years. At a modest 8% average annual growth rate, they would not own a home at age 65, but they could have a $1.13 million portfolio from investing the housing cost savings, on top of any other retirement savings. The average annual S&P 500 growth rate is closer to 10%, so the gains could be meaningfully greater than in this example, but depending on how the stock market performs and how much rent increases, it could be "a close call" as to whether a home or the stock market is a better investment, Zandi told MarketWatch. The renter advantage also narrows significantly the longer a person waits to start investing - the sooner the better. To maintain an edge, the renter would have to invest consistently over the three-decade period and stay invested through downturns, which many people find difficult, Zandi noted. Home prices, meanwhile, are much less volatile. "The actual arithmetic" of building wealth as a renter has been the same for decades, but indexing and automation have made the stock market "a more viable vehicle" for people to invest today compared to the past, Zandi said. Having net worth in the stock market rather than in a home also results in meaningful differences in how easily people can access their wealth for consumption, financial planners said. That makes it easier to access needed cash, but it also can make it too easy to circumvent the overall investing plan. A home is a valuable asset, but people must remember it is illiquid, said Cornell, the financial planner. "I can't be like, 'Oh, I need $20,000 this month, I'll sell my front door.'" This investing strategy is harder for the large swaths of low- and moderate-income workers who can't afford to consider buying to begin with. These households make up a large share of the renter population and often spend more than 30% - and in some cases, even more than 50% - of their income on housing. Costs may be worse for home buyers, but the Harvard housing center shows rental affordability has also deteriorated in recent decades. About 23% of renters were behind on their rent at some point in 2025. These households need a way to build assets outside of housing, which has a high barrier to entry. Rents for low-income tenants receiving government housing assistance, for instance, are often set as a fixed percentage of their income, making it hard for them to get ahead as their pay rises. Some programs are trying to offer new systems to help them save. The Family Self Sufficiency program, run by the Department of Housing and Urban Development, creates a sort of forced savings account for low-income renters. Participants either live in public housing or receive government assistance for housing. When their pay increases, which would typically trigger an uptick in their rent (as it is calculated as a percent of their income), those extra funds are instead siphoned into an interest-bearing escrow bank account. On average, families complete the five-year program with $8,500 in savings, according to Compass Working Capital, one of the HUD partners that administers the program and also provides financial coaching to tenants who participate. "It's a built-in savings mechanism," Compass spokesperson Purvi Harley told MarketWatch. Many of the participants have goals "in service of long-term wealth-building, that are going to pay ongoing dividends to their family." This includes homeownership, and Compass also educates tenants "on financial education, understanding markets, and understanding how investing works," she said. Financial flexibility of renting In the past, few people would have seriously considered renting as a financial strategy. Homeownership was synonymous with success and stability, and buying was affordable. Gene White said unlike his parents, he has other financial priorities than homeownership as a young adult. Gene White, a 28-year-old in Chicago, told MarketWatch his parents benefited from "economic serendipity." Neither went to college. His mother worked as a teaching assistant and his father a painter, and they earned enough to buy a home, which was their priority. They "didn't have a lot of investments," White recalled. "My mom used to always say, 'Everything we have is in this house.'" As a young adult, White is prioritizing a different lifestyle. He rents a one-bedroom for about $1,900. "Financial freedom for me looks like, if I want to go to London on a weekend trip, or something like that, I can go buy a ticket." Some millennials, in particular those who watched housing wealth evaporate during the Great Recession, may also see homeownership as "a liability," said Whitney Airgood-Obrycki, a senior research associate at the Harvard housing studies center. "Things that used to seem like 'Great, yes become a homeowner, there's no issue here,' have started to feel like 'Well, I don't know.'" Gallup data show that the share of 18- to 34-year-olds who don't intend to buy a home in the near future roughly doubled to 30% over the past decade. For some, this is deliberate. Nearly half of both millennials and Gen Zers recently surveyed by consultancy Simon-Kucher said they saw renting as "a strategic long-term lifestyle choice," compared to 29% of baby boomers. Even households with the money to buy are considering renting's perks. As more Americans rent well into their 30s, higher-income renters have been driving rental demand over the past decade, Airgood-Obrycki said. And they "look more like what first-time home buyers looked like in previous generations." About one-third of renter households earning at least $175,000 have a 25- to 34-year-old as the head and 26% of high-income renter households are headed by someone 35 to 44, the Harvard housing studies center told MarketWatch. Historically, Americans bought their first home during this period of life. Nearly half of high-income renters are married, 70% of those households are headed by someone with a college degree and one-third by someone with a graduate degree, according to the Harvard center. When financial planner Josh Radman, 35, first starts working with clients, mostly high-income people in their 30s and 40s, he asks them about their financial goals. Buying a home often comes up in this conversation. Radman himself is "a very happy renter," he said. "I have a really great landlord, so that obviously helps too." If a client wants to buy, he tries to understand what's motivating the desire. "There can be good reasons why we purchase a house even if it doesn't necessarily make financial sense," Radman said. For some people, it's fulfilling their vision of the American dream. Others may be struggling to find a decent rental. Many have an emotional interest in building a life around the home itself, measuring their kids' height on the doorway, watching their kids grow up in the house and then growing old in it. Many of the classic benefits of homeownership still apply as well. Owners can largely lock in their housing costs over decades and there are tax advantages to owning. But financial advisers are starting to be more honest about owning's disadvantages too. To start, Radman may show clients a mortgage amortization schedule, which highlights the large share of a monthly mortgage payment that goes to interest - and not building equity - in the first five or so years of owning a home. That "can be an eye-opening experience for folks" who simply think of a home as a savings vehicle, especially in an environment with relatively high interest rates, he said. 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