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 Turning Houses Into Homes

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!

Kathy Henne GRI, CRS, OWNER/BROKER REMAX FINEST Piqua, OH Kathy Kathy's passion for real estate knows no bounds. With over 29 years of experience as an agent and Broker/Owner of RE/MAX Finest, she has honed her expertise in various areas of the industry. From assisting first-time home buyers in finding their dream homes to serving as a skilled listing agent, Kathy is dedicated to providing exceptional service to her clients. Recognizing the potential for wealth creation through real estate, Kathy is also well-versed in investment properties. She understands the intricacies of identifying profitable opportunities and guiding investors towards the right choices. As a buyer's agent, she meticulously evaluates each property to ensure her clients make informed decisions, whether they are upsizing, downsizing, or relocating. Kathy's expertise extends beyond residential real estate. She has a keen eye for emerging market trends and is well-equipped to handle pre-construction projects, condos, multi-family dwellings, estates, luxury properties, farmland, and lots. Her comprehensive knowledge of these diverse segments enables her to provide tailored solutions to clients with various needs and aspirations. While Kathy thrives in the fast-paced real estate industry, she also understands the importance of maintaining a healthy lifestyle. As a fitness nut, she religiously logs 2 miles a day on her elliptical machine, ensuring she remains energized and focused to deliver the highest level of service to her clients. Driven by a commitment to excellence, Kathy's ultimate goal is to leave her clients "Happy" with their real estate experience. She goes above and beyond to provide personalized attention, diligently guiding them through every step of the real estate process. With Kathy as your trusted real estate partner, you can be confident that you will receive exceptional service and achieve your desired outcomes in the ever-changing real estate market. Contact Me Visit my Website Send a Referral Subscribe to Newsletter