If your goal is to achieve financial freedom early in life, avoid purchasing a home, advises a seasoned investor. Owning property is merely a ‘costly luxury’

Is Renting a Better Choice Than Buying a Home?

With property values now 50% higher than pre-pandemic levels, mortgage rates stubbornly hovering around 6%, and the cost of living climbing due to inflation and tariffs, many young Americans find homeownership increasingly unattainable.

However, one seasoned investor suggests that renting may not be as disadvantageous as it’s often portrayed, even though owning a home is widely considered part of the American Dream.

JL Collins, author of Pathfinders and The Simple Path to Wealth, shared on The Diary of a CEO podcast that purchasing a home can significantly raise your living expenses. While monthly rent and mortgage payments might seem comparable, owning a home typically results in higher long-term costs and comes with a host of unexpected expenses—commonly known as the “hidden costs” of homeownership, such as insurance, repairs, and renovations.

“There are ongoing costs like maintenance and property taxes,” Collins explained. “If you choose to rent a modest apartment that suits your needs—like my daughter has done—you’ll likely spend less overall.”

Supporting this perspective, a recent study found that renting is more affordable than owning in every major U.S. city. On average, homeowners pay 36.9% more each month on their mortgages compared to renters. In 2024, the median monthly rent was $1,487, while homeowners with mortgages faced median monthly costs of $2,035—a difference of nearly $550 per month, or over $6,500 annually.

Collins argues that this gap makes homeownership an “expensive luxury.”

“Most people buy the largest home they can afford, often encouraged by the industry,” he said. “This leads to taking on a property that becomes a financial strain, as buyers stretch their budgets and borrow as much as lenders will allow.”

Collins, who has owned several homes himself, notes that the expenses don’t stop at the mortgage. Homeowners should also plan for furniture, appliances, landscaping, taxes, and ongoing upkeep.

“The list of expenses goes on and on,” he remarked. “The mortgage is just the beginning.”

The Challenges Facing Aspiring Homeowners

Matt Schultz, chief consumer finance analyst at LendingTree, acknowledged in a statement to Fortune that these figures can be discouraging for those hoping to buy a home.

“Some people are coming to terms with the idea that homeownership may never be possible for them,” Schultz said. “That decision has far-reaching effects, not just for individuals, but for the broader economy. Sadly, this situation isn’t likely to improve soon.”

This outlook aligns with predictions from other housing experts and economists. Even if mortgage rates dip slightly, the hidden costs of owning a home persist, and property prices are unlikely to fall enough to make a significant impact.

Data from Realtor.com, shared with Fortune, indicates that for homes to become more affordable for the average American, one of three things would need to occur: mortgage rates would have to drop to 2.65%, median household incomes would need to rise by 56%, or home prices would need to fall by 35%. None of these scenarios appear likely.

“We’re in a difficult situation,” said Max Slyusarchuk, CEO of A&D Mortgage, in a previous interview with Fortune. “Whenever there’s progress in any of these areas, increased demand quickly pushes prices back up.”