Buy vs rent in 2026: framework + the math

The 5-7-15 rule

Standard calculators tell you "Buy if you stay 5+ years." That is incomplete. The honest rule:

• 5 years — You break even on transaction costs (6% sell commission, ~2% buy costs) if appreciation matches inflation.
• 7 years — You meaningfully out-earn renting + investing the down-payment in an index fund, assuming average appreciation.
• 15 years — You build life-changing equity through forced savings (mortgage paydown), even in a market with mediocre appreciation.

Under 5 years, renting almost always wins financially. 5-7 years is a coin flip. 7+ years tilts to buying.

What calculators get wrong

1. They use Zillow's rent estimate for the rent column. Often 5-10% high. Use actual leased comps.
2. They ignore opportunity cost. $200K down payment invested in an index fund at 7% becomes $390K in 10 years. The calculator counts only the home's appreciation, not what your down payment could have done elsewhere.
3. They underestimate maintenance. 1-2% of home value annually is the textbook number. In California's older inventory it is often 2-3%.
4. They overestimate the tax deduction. Post-2018 SALT cap + standard deduction increase means most middle-income buyers do not itemize and get $0 from mortgage interest deduction.
5. They assume you stay forever. The actual median homeownership tenure is 7-9 years.

When renting clearly wins

• You will move in <5 years.
• You are in a market where rent ÷ price < 0.4% (most of coastal California).
• You can invest the down-payment difference and will actually do it (not let it sit in checking).
• You value flexibility (jobs, partners, lifestyle) more than equity build.
• You do not want to be a homeowner. Plumbing problems, HOA disputes, neighbor noise are your problem when you own.

When buying clearly wins

• You will be in the area 10+ years.
• You are in a market where rent / price is > 0.6% (most of the Midwest, parts of the South).
• You are buying with serious cash down and the mortgage payment is ≤ 25% of gross income.
• You want forced savings — mortgage paydown becomes equity even if you cannot help spending the rest.
• The home meets a life need (school district, family proximity) that rent comparables cannot match.