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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!

Tammy Fadler GRI, CRS, EXP Realty LLC Festus, MO (314) 346-1400 2022005892 THUAN TAMMY FADLER: Living embodiment of The American Dream. Leaving war-torn Vietnam as a naïve twenty-two-year-old, I bravely struck out on my own in a new country … where everyone “looked alike.” Armed with only a fifth-grade education, $10, one suitcase – and a one-way ticket to the wrong city in America, she did it. She reached the pinnacle of success. A college graduate, mother of two, grandmother of five and a proud great grandmother of three girls, I hold several professional real estate designations including. She became Howard Brinton Star and part of the family in 1999. Consistent transaction production for 37+ years and over 5,000 families serve, top 10% of realtors nationwide. And that’s after entering the real estate business in 1987 when a devastating fire turned my thriving restaurant into a pile of ashes. The dogged determination and survival of the young Thuan from a third-world country, her remarkable journey to America, and her self-made metamorphosis into the present-day Tammy Fadler. My life-long experience in sales (from hawking fish in the market as a youngster of ten to cleaning pig styes in exchange for tutoring money, to currently beside her real estate business she also an owner/developer in commercial and retails complex. “This gives me invaluable insight and understanding of the process involved in achieving a dream”. Her book Finding the Pearl appeals to people from all walks of life who are willing to work for success. Those who are unwilling to accept “No” as an answer. Those who change the words “You can’t” into “I can.” This book addresses the determination, fortitude, and courage of one woman’s remarkable life through lively, readable, and captivating stories that translate easily into every-day application. Tammy’s principals and lesson learned: • Life priority Spiritual, Health, Family, Intellectual and Financial • We have a moral obligation to be best that you can • Have a dream, a mission that bigger than yourself • You have greatness in you to succeed • Believing in your dream, because it will become your reality • Every day of life we encounter a defining moment. Do we define the moment, or do we allow the moment to define us? We have a choice My dream has become my reality. 27 members of my family are now living in the land of opportunity. I thank GOD for creating a place call “AMERICA” Visit my Website Send a Referral