Should I Still Buy My First Home in a Renters Market?

In 2021 and 2022, there was a construction boom of new apartment building projects. After pandemic-related delays and slow starts to get renters in at initial prices, those units are now completed and widely available as of 2025. And property managers are lowering prices and opening up to negotiations to get them filled. So what’s the advantage of homeownership, even in what some are calling a renters market? 

Homeownership Wealth

For renters who have been waiting to enter the homebuying market in the last couple of years, but have now seen rents drop by 3.7% since 2022 while home prices have gone up, they may be asking, “Why should I buy?” 

One very simple and highly compelling answer: wealth. The net worth of a homeowner is around 40x greater than that of a renter. 

Equity Education

When you buy your first home, you begin building wealth in the form of equity. Equity is equal to the amount your home is worth minus the principal balance you owe on it. Let’s say you buy a home for $350,000 and put 5% down. By the following year, your home is worth $360,000, and your principal balance is around $310,000. That would mean you have $50,000 in equity ($360k – $310k).  

What does that really mean, though? While equity is not the kind of wealth you pay your bills with, it is your money. When you sell your home, you have access to that $50k to use for the down payment on the next home, pay off debts, put into investment accounts, etc.   

Money Saved on Homeownership

Now, let’s look at an extremely realistic scenario for a first-time buyer. Say you’re renting a studio apartment for $1,700/month. You could buy a one-bedroom condo for $200,000 at an interest rate of 6.5%, put $10,000 down, and have a total monthly payment of around $1,800 (*see what’s included in the monthly payment below). Here’s how this breaks down: 

• If you continue to rent, you save a total of $300 over the course of three months
• Over the last three months of 2024, homeowners gained an average of $5,700 in equity

Now let’s look at an entire year and assume a flat $5,000 equity gain per quarter: 

• As a renter, you saved $1,200 on your housing expense
• As an owner, you gained $20,000- enough to earn back what you spent on the down payment and then some

As long as the extra $100/month in housing expense is manageable, homeownership is likely your best option. 

Secure Your Future 

The thing about renters markets is that they don’t stick around forever and rents can go back up. But once you take out a mortgage, your principal and interest balance can never change. While renting may be cheaper by the month than owning during a renters market, homeownership ensures you’ll begin growing wealth while keeping the same monthly payment. 

If you’re a first-time buyer in Chicago or Nashville, our local mortgage bankers are here to help. 

*Monthly payment includes principal & interest $1,201, mortgage insurance $50, homeowners insurance $58, real estate taxes $167, and HOA dues $300 

Dehan, A. Taylor, M. Segal, T. (16 Jan 2025). Home equity data and statistics: Why they matter to homeowners. Bankrate. https://www.bankrate.com/home-equity/homeowner-equity-data-and-statistics

Sola, A. (31 Jan 2025). 2025 is a ‘renter’s market,’ housing economist says — here’s how to take advantage. CNBC. https://www.cnbc.com/2025/01/31/2025-is-a-renters-market-heres-how-to-take-advantage.html