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!

Madolyn Greve, Global Real Estate Sales Broker Associate ABR, AHWD, CNE, CRS, e-PRO, GREEN, SRS, SRES Callaway Henderson Sotheby's International Realty Princeton, NJ (609) 462-2505 MadolynGreve@CallawayHenderson.com 8644010 Madolyn Greve Global Real Estate Sales Broker Associate Callaway Henderson Sotheby's International Realty Princeton Office 4 Nassau Street, Princeton, NJ 08542 MadolynGreve@CallawayHenderson.com, Text/Call: 609-462-2505 "Your Trusted Real Estate Advisor for the Greater Princeton Area" I enjoy the process of listening to my clients' needs and educating and advising them to move forward with decisions that are beneficial to their goals achieving List Price vs. Sales Price 98.11% in the past 25 years. I am loyal and present throughout the entire real estate transaction whether representing a buyer, seller, tenant, or landlord. It is my priority to remain knowledgeable and familiar with the ever changing real estate market in order to provide top-quality service. My desire is to provide gracious and personal customer service assisted with today's cutting edge technology. Through my actions it is apparent that I covet my reputation and exhibit a strong desire to guide you with honesty and integrity. I practice real estate full time in New Jersey and have held a real estate Certifications & Designations ABR, AHWD, CNE, e-PRO, CRS, GREEN, SRS, SRES Broker Sales Associate, ABR, Accredited Buyer Representative®,AHWD, At Home with Diversity, CRS, Certified Residential Specialist, Council of Residential Specialists, GREEN, The Green Resource Council, SRS, Seller Representative Specialist, The Council of Real Estate Brokerage Managers, SRES, Seniors Real Estate Specialist® The SRES Council. Awards: I am honored to be recognized as a FIVE STAR real estate agent receiving the Professional Exceptional Service Award for 13 years through the votes of my clients. My Community Involvement: The Princeton Mercer Regional Chamber of Commerce, The National Association of Realtors, The Nassau Club of Princeton, The Present Day Club of Princeton, The Junior League of Greater Princeton, Chi Omega Fraternity and The Nassau Presbyterian Church.I I have owned my home in the "Littlebrook Area" of Princeton for the past 35 years. I happily reside with my Coton de tulear, Bentley Winston. Contact Me Visit my Website Send a Referral Subscribe to Newsletter