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The Opportunity Cost of Delaying Homeownership - 7/23/2025

Opportunity cost is the value of the next best alternative that you give up when making a decision. In real estate, this concept plays a crucial role for buyers who are delaying to purchase a home due to high interest rates and rising home prices. The question is: What is the cost of waiting?

Many potential homebuyers remain on the fence, choosing to rent instead of purchasing a home. However, by doing so, they may be missing out on one of the greatest wealth-building opportunities: home equity. Let's break it down.

Comparing Renting vs. Buying

Consider a renter paying $3,300 per month versus purchasing a $400,000 home with a 10% down payment and a 30-year mortgage at 6.76% interest. The total monthly mortgage payment (including principal, interest, taxes, and insurance) would be $3,526.68—higher than rent at first glance. However, this doesn't account for the financial benefits of homeownership.

  • In the first year:
    The homeowner reduces their loan principal through mortgage payments, averaging $587.57 per month in principal reduction.
  • The home appreciates at 3% per year, equating to $1,000 per month in gained value.
  • Factoring in $2,000 in annual maintenance costs, the true cost of homeownership is reduced to $2,374.23 per monthless than the cost of renting.

Long-Term Equity vs. Investment in CDs

After 7 years, the homeowner will have built $165,062 in home equity through appreciation and principal reduction. Meanwhile, if the renter put $40,000 they have for the down payment into a CD earning 2.5% interest, it would only grow to $47,547...less than a third of the homeowner's equity.

The Cost of Waiting

The opportunity cost of continuing to rent instead of buying is significant. Even if interest rates or home prices seem high now, waiting means missing out on the long-term financial benefits of homeownership, including appreciation, equity buildup, and potential tax advantages.  Not to mention that home prices are expected to continue to rise because of the continued shortage of inventory and so are rental rates.

If you're on the fence about buying, let's discuss your options and look at a projection with your numbers to see if now is the right time for you. The numbers might surprise you!

Debra K. Cooper SRES, ABR, CSA, SFR & GREEN - Masters Diamond, Eme Century 21 Atwood Chanhassen, MN (612) 501-8597 20413656 Real estate is not just about buying or selling property.....It's about setting and building upon a foundation for your future. You've come to the right place. As your Realtor I promise to always have your best interest in mind whether buying, selling or both. I'll be there as your coach, your mentor, your teammate. I'll even try to make the process fun and keep you informed every step of the way. As a lifelong resident of the Twin Cities, living in the west metro I know this market well. Licensed and working as a full time Realtor since 2003. You owe it to yourself to work with a Realtor who is not only knowledgeable about this market, but who is experienced. I've sold hundreds of properties of all types here in the metro area and beyond. Whether that means you are buying your first home, selling or buying one of many homes, or you are looking to buy investment property, you deserve the same attention to detail. Buying or selling real estate is an exciting and complex adventure. It can also be a very time-consuming and costly one if you are not familiar with all aspects of the process and don't have the best information and resources. I've built my business primarily by way of referrals and past clients - something I'm very proud of and the highest praise I can possibly receive. Regardless of where you are at in your life, I know that I can help make this a great experience for you and maybe we can also have some fun while we are at it! Please contact me when you have a moment. I'm looking forward to meeting and working with you! Licensed since 2003 - Hundreds of Properties SOLD! Masters Diamond, Emerald and Ruby Award Recipient Quality Service Pinnacle Award Recipient Named "SUPER REALTOR "Eight Times!! by Minneapolis/St. Paul and TC Business Magazines Contact Me Send a Referral Subscribe to Newsletter