Homeownership and the American Dream—a classic pairing, right? At one time, they might have been synonymous, but for many young Americans today, the reality of entering the housing market feels out of reach. My husband and I have accepted that owning a home isn’t in the cards for us anytime soon unless there’s a significant shift in the housing market—and that’s okay. Why? Because there are other, often overlooked, ways to build wealth that don’t rely on homeownership.
Challenging the Homeownership Myth
You might be thinking, But Lauren, owning a home is crucial for building individual wealth! For decades, that was true. Yet, the reality is that home equity is wealth tied up in an asset that primarily serves to provide shelter—not a liquid investment.
Perhaps you’re also wondering, Isn’t buying a home cheaper in the long run? The short answer: not necessarily. Even in our low-cost-of-living area in rural Missouri, renting has proven to be the more financially sound option. Here’s why.
The Numbers Don’t Lie
Here’s a breakdown of our current costs:
Renting Costs
- Monthly rent: $1,050
- Annual renter’s insurance: $300
Homeownership Costs
- Cost of a comparable home: $270,000
- Monthly mortgage payment (30-year mortgage, 20% down): $2,350
- Annual homeowner’s insurance: $1,500
- Annual property taxes: $2,700
- Annual maintenance/improvements: $4,050
Assuming a 10% nominal annual return from investments in the S&P 500 compared to a 3% annual home appreciation rate, it becomes clear: over 30 years, renting and investing the difference beats owning financially. You don’t have to take my word for it—try running the numbers using a tool like this calculator from calculator.net.
While our situation might seem unique—our rental costs are significantly lower than a comparable mortgage—I encourage you to calculate your own figures before committing to the high costs and low liquidity of homeownership.
Building Wealth Without a Mortgage
So, how do we grow our wealth without the “traditional” engine of a home? It’s simple: we pay rent and invest the rest. Tax-advantaged accounts like a 401(k), Roth IRA, or HSA are great places to start. Beyond those, after-tax brokerage accounts offer flexibility. By consistently investing in the S&P 500 and reinvesting dividends, your money works harder and grows faster compared to being locked in a property.
Perks of Renting
Renting offers more than just financial benefits.
- Reduced Stress: When something breaks, it’s not your responsibility to fix it. No unexpected plumbing disasters to worry about!
- Flexibility: Renting provides the freedom to relocate without the costs and hassle of selling a home (often around 6% of the sale price). You can adapt to changes in career, family needs, or lifestyle without being tied down.
Is Homeownership Ever the Best Option?
Of course, there are times when owning a home makes sense. Historically, housing markets and personal circumstances have aligned to make it a viable wealth-building strategy. But in today’s market, for most people, it simply doesn’t add up. Without a dramatic downturn like the 2008 housing crisis, my family will continue renting—content with our affordable home, less financial stress, and a flexible future.
Whether you rent or own, the key is doing your homework. Run the numbers, weigh the pros and cons, and make the decision that works best for you and your financial goals. For us, renting is the clear winner, and we’re making the most of it.
The Wandering Librarian 
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