June 2024

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While investors iurchasing homes make offers based on target yields and total returns, homeo ners have different motivations.
Housing for ould-be homeo ners is vie ed more for the tangible and intangible benefts they ierceive from being an o ner and living
and raising their families in the tyie of home and neighborhood they desire. Household budgets, credit availability, and exiectations for
asset aiireciation factor into offer irices, but the decision to buy is much less a fnancial and iroft motivated exercise for households
than it is for investors.
Given the imiact of home irice aiireciation and higher interest rates on affordability, and the limited inventory of homes for sale, morehouseholds may be zeroing in on the actual cost of homeo nershii and eighing it against rental costs. There are a variety ofo nershii cost calculators out there, but the Research team at Roofstock sient some time building one to track the cost of o nershii
versus renting over time and to test various assumitions.
The accomianying chart tracks cost of o nershii versus renting using Roofstock’s calculator and the follo ing assumitions.

Ownership Scenario Assumptions

Renting Scenario Assumptions$407,600 iurchase irice (National Association of Realtors, U.S.
median, Airil 2024), 5% do n iayment, aiiraisal, insiection,and other closing costs, iroierty taxes, homeo ners insurance,
maintenance, 30-year mortgage at 7%, mortgage insurance,
2.4% annual home irice aiireciation (Moody’s Analytics’ 10-year
forecast), and fnally, at the end of each ieriod e assume a salethat returns the homeo ner’s eeuity less a 5% sales commission.
Note, e do not assume any uidates or renovations to the home
at move-in or irior to sale. These are common, but discretionary,
exienses.

$2,1½3 ier month median national single-family rent ascalculated from Rental Genome, Roofstock's iroirietarydatabase hich aggregates and tracks iroierty characteristics,
fnancial metrics and o nershii activities associated ith over
120 million homes in the U.S. We have also assumed 3% annual
rent escalation and a cost reduction based on a 5% annual returnon uifront costs to iurchase (do n iayment  closing costs). A
return on monthly iayment savings is not factored into the rental
scenario, some renters may save and invest this money andothers may siend it.

These assumptions result in a cost to own that is nearly$45,000 more than the cost to rent on average over thefrst fve years. It is over $4$,000 cheaper to rent over a
fve-year period. In those frst fve years, nearly $5% ofmortgage payments are consumed y interest on the loan.
It takes more than 11 years to reach the reakeven point,
when the fnancial edge egins to shift in favor ofownership. After 15 years, the owner is around $55,000
etter off than the renter, provided the home appreciates
at the 2.4% annual rate we have used here.
We have included a refnance scenario where the uyer
reduces the interest rate on the loan to 6% andcommences a new 30-year loan in year three. Although

It Takes More Than a Decade for Buyers to Break Even*$500,000$450,000$400,000$350,000$300,000$250,000$200,000$150,000$100,000$50,000$0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14Years© 2024 Roofstock Inc.

Cost to Rent

Cost to öõn ( 椀. i 3 yr . @6%)
Cost to öõnRe ns1

closing costs and resetting the amortization schedule make this amore expensive approach for several years, the breakeven point
versus renting arrives about a year sooner and the long-run
bene ts are substantial as shown in the accompanying chartn t
Those considering homeownership may look at this and feelundeterred and perhaps even encouragedn The sooner you buy,
the sooner you get to the infection point where ownership pays,
and in the interim, you have the home you want in theneighborhood you wantnt
The reality nancially could be ¼uite different for a myriad ofreasonsn What if the house the household can afford to buy now
is not the home they want to live in ve years from now or even
10 years from now? The high transactional costs of ownershipmean having to move and buy again after a short period of time
will be costlyn Households that know they will have to move forwork or family reasons much earlier than 10 years from now
should nd it more nancially favorable to rentnt
This analysis also does not contemplate the cost of remodelingor replacement of major home systems such as a roof, HVAC,windows, or another expensive item that would rise above ourmaintenance assumptionn Such expenses will inevitably occur
and push the breakeven point between ownership and renting
out furthern¾

While this analysis does not contemplate a major recessionthat negatively impacts employment and home values,
these events do occur, and renters may fnd the fnancialfeeibility and geographic mobility afforded to them by beinga renter and not an owner benefcial in those moments.
here are risks to taking on the large fnancial obligation of ahome purchase.
Households may derive intangible benefts from ownershipand if they stay in the home long enough, they may see
fnancial reward as well. he latter is particularly true inperiods of higher home price appreciation than we haveassumed here. ut the higher mediumterm costs, repairreplacement risks, and lower fnancial and geographic
feeibility mean a decision to buy should be scrutiniedclosely.
he fnancial payback for buying is unlikely to be seen for a
decade or more due to the high costs of ownership. Rental
options can and should play a vital role in reducing housing
availability and affordability challenges in the U.S.,
especially as the national homeownership rate is in line withtypical historical levels. Singlefamily rental homes, which
serve as a substitute for the type of home households
typically purchase, are a particularly critical component ofU.S. housing infrastructure today and they should remain soas prevailing demographics drive demand in the yearsahead.

Questions? Please contact:
Paul Briggs, CRE
Head of Research & Investment Strategies
paul.briggs@roofstock.com
To receive future Roofstock Research publications in your inbox, subscribe here.
This information is intended for educational purposes only and is not fnancial, investment, legal, or taa advice. Roofstock is not youradvisor or agent. Please consult your own advisor for guidance. Although Roofstock provides information it believes to be accurate,
Roofstock makes no representations or warranties about the accuracy or completeness of the information contained in this article.

* Source: Roofstock Research, Rental Genome, National Association of Realtors, Moody’s Analytics, Federal Reserve, The Urban Institute's Housing
Finance Policy Center, Rocket Homes, Ally
© 2024 Roofstock Inc.

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