Is Renting Really Cheaper Than Buying? Why a 7% Mortgage Rate Doesn't Tell the Whole Story
If you've been thinking about buying a home in North Carolina, you've probably heard some version of this:
"With mortgage rates over 7%, it's cheaper to rent."
And honestly, I understand why that sounds convincing.
Mortgage rates are significantly higher than they were a few years ago, and a higher interest rate can have a major impact on a monthly mortgage payment.
But there is a problem with looking at the housing market through mortgage rates alone:
The interest rate isn't the entire cost of buying a home.
A recent analysis from Homes.com looked back at housing conditions from the mid-1990s, when mortgage rates were also commonly in the 7%–9% range. The findings are a good reminder that buying a home can still make financial sense even when mortgage rates are elevated—particularly when you're purchasing a home that is reasonably priced compared with what it would cost to rent a similar property.
So, should you buy or rent in today's market?
The answer is more complicated than simply looking at the mortgage rate.
Mortgage Rates Aren't the Only Number That Matters
When people compare buying and renting, the first number they usually look at is the mortgage rate.
That's understandable.
A 7% mortgage is obviously more expensive than a 3% mortgage. But the rate doesn't tell you whether the home itself is reasonably priced.
Consider two homes:
Home A: $300,000 and rents for $2,500 per month
Home B: $600,000 and rents for $2,500 per month
The mortgage rate could be identical for both homes, but the financial equation is very different.
That's why one of the most important concepts in the Homes.com analysis is the price-to-rent ratio—essentially, how much you're paying for a home compared with what a similar home would cost to rent.
For example, a $300,000 home that rents for $2,500 per month has an annual rent of $30,000.
$300,000 ÷ $30,000 = 10
That means the home's price is about 10 times its annual rent.
According to the Homes.com analysis, today's lower-priced homes have a typical price-to-rent ratio of around 9, while the middle of the market is closer to 13. Historically, homes at these lower multiples have often favored buying even when mortgage rates were relatively high.
What the 1990s Can Teach Today's Buyers
This is where the analysis gets particularly interesting.
During much of the mid-1990s, mortgage rates were between roughly 7% and 9%.
Sound familiar?
Yet many people who purchased homes during that period ultimately built significant wealth through homeownership.
The reason wasn't that mortgage rates were low.
They weren't.
Instead, the relationship between home prices and rents made buying attractive for many households.
The Homes.com analysis compared two hypothetical households: one that purchased a home with a 20% down payment and a 30-year mortgage, and another that rented a comparable home and invested the money they saved by renting.
The analysis accounted for things like property taxes, insurance, maintenance, transaction costs and investment returns.
The takeaway?
A high mortgage rate doesn't automatically make renting the better financial decision.
The Case for Buying Can Be Stronger at Lower Price Points
One of the most important takeaways for first-time buyers is that the math can look particularly favorable at the lower and middle portions of the housing market.
Homes.com found that the least expensive fifth of homes today sell for approximately nine times their annual rent, compared with roughly 13 times annual rent for homes in the middle of the market.
At the high end, the ratio gets considerably larger.
Why does that matter?
Because rents don't necessarily increase as quickly as home prices as you move into more expensive properties.
According to the Homes.com analysis, the least expensive fifth of homes rents for about 10.8% of its value annually, compared with approximately 5.7% for the most expensive fifth.
That helps explain why the financial case for buying can be stronger for someone purchasing a moderately priced home than for someone purchasing a very expensive property.
So Does That Mean Everyone Should Buy?
Absolutely not.
This is an important distinction.
I'm not a fan of telling someone that buying is always better than renting.
There are situations where renting makes perfect sense.
For example, renting may be the better option if:
You aren't sure where you'll live in the next few years
Your job or lifestyle requires flexibility
You don't have enough savings for a comfortable purchase
The homes you're considering are significantly overpriced compared with local rents
You would struggle with the monthly payment
You aren't financially prepared for maintenance and unexpected expenses
You are disciplined about investing the difference between your rent and potential housing costs
The Homes.com analysis also points out that renting can remain financially attractive for some higher-priced homes, particularly for people who expect to move again relatively soon and consistently invest their savings.
Buying a home is a major financial decision.
The goal isn't to convince everyone to buy. It's to help you determine whether buying makes sense for you.
But Don't Wait for the "Perfect" Interest Rate
This is one of the biggest traps I see prospective buyers fall into.
Someone may say:
"I'll buy when rates come down."
But what happens if rates fall and home prices increase?
Or if more buyers enter the market and competition increases?
Or if sellers become less willing to negotiate?
There is no guarantee that a future lower interest rate will automatically produce a better overall deal.
And there's another important point: you can potentially refinance a mortgage in the future if rates become more favorable.
The Homes.com analysis notes that buyers in the 1990s benefited from refinancing as rates declined over the following decades. However, today's buyers shouldn't assume refinancing will happen or build their entire financial plan around that possibility.
In other words:
Buy the home because the numbers work for you today—not because you're counting on rates falling tomorrow.
If rates eventually improve, refinancing could be an added benefit.
What About North Carolina Buyers?
This is where the national conversation needs to become local.
The numbers for Charlotte, Concord, Kannapolis, Harrisburg, Huntersville, Mooresville, Salisbury, Lexington and surrounding communities aren't necessarily going to look the same.
The rent for a three-bedroom home in Concord isn't the same as the rent for a comparable home in Huntersville.
The price of a starter home in Kannapolis isn't the same as one in Davidson.
And the monthly cost of owning a home isn't determined by the mortgage rate alone.
When I work with buyers, I think it's important to look at the whole housing equation, including:
Purchase price
Mortgage rate
Down payment
Property taxes
Homeowners insurance
HOA fees
Maintenance
Potential repairs
Expected length of ownership
Comparable rental costs
Potential future resale value
How much cash you have left after closing
That's a much better way to evaluate whether buying makes sense than simply asking, "What is the interest rate?"
Renting Is a Monthly Expense. Buying Is More Complicated.
When you rent, your monthly payment primarily pays for your housing.
When you own, part of your mortgage payment goes toward paying down your loan balance.
Over time, that can build equity.
You also have the potential to benefit from appreciation if the home increases in value.
That doesn't mean appreciation is guaranteed, and homeowners also take on expenses and risks that renters don't.
But it does mean that comparing a $2,000 rent payment to a $2,000 mortgage payment isn't necessarily an apples-to-apples comparison.
A portion of the mortgage payment is building ownership in an asset.
The important question is whether the total cost of owning makes sense relative to the home you're buying and what you would otherwise pay to rent.
The Question You Should Actually Be Asking
Instead of asking:
"Are mortgage rates too high to buy?"
Try asking:
"Does buying this particular home make financial sense compared with renting a similar home?"
That's a much better question.
A 7% mortgage on a reasonably priced home that you plan to own for many years could make more sense than continuing to rent.
Meanwhile, a very expensive home with a large gap between the cost to own and the cost to rent might make renting a better choice—especially if you're only planning to stay for a few years.
There isn't one answer that applies to every buyer.
The Bottom Line for North Carolina Home Buyers
Mortgage rates above 7% have absolutely changed the affordability equation.
There's no pretending otherwise.
But high rates don't automatically mean buying is a bad financial decision.
History shows us that people have successfully purchased homes and built wealth during periods when mortgage rates were considerably higher than the ultra-low rates many buyers became accustomed to during the 2020–2021 period.
The bigger question is what you're buying, what you're paying for it and how long you plan to own it.
For many first-time buyers in the North Charlotte area, the right home at the right price could still make sense—even in a higher-rate environment.
And for others, renting for another year or two may be the smarter move.
That's why I don't believe buyers should make decisions based on headlines alone.
Look at the numbers. Look at the local market. Look at your personal financial situation. And then make the decision that makes sense for you.
If you're considering buying a home in Concord, Kannapolis, Harrisburg, Huntersville, Charlotte, Salisbury, Lexington or the surrounding North Carolina communities, I'd be happy to help you compare the cost of buying versus renting based on the homes and neighborhoods you're actually considering.
Sometimes the answer isn't as simple as "rent" or "buy."
But it is possible to figure out what makes the most sense for you.
