Is It Better to Rent or Buy a Home in Connecticut Right Now?

It sounds like a simple question.

Find the average rent. Compare it to the payment on an average home. Whichever costs less wins.

Except that doesn't tell you very much.

Using six months of New Haven County MLS sales and rental data, I found that buying often comes out ahead when comparing similar single-family homes over a longer holding period. Renting can be financially stronger when you're willing to rent less expensive housing and consistently invest the money you save.

The median single-family home in the New Haven County data sold for about $450,000. The median single-family rental was about $3,000 per month.

But the median home that sold was about 1,759 square feet. The median rental was about 1,445 square feet.

That's a difference of more than 300 square feet.

We're already comparing two different things.

And that's before we account for location.

Rent vs. Buy Depends on Where You Live in Connecticut

A house in Waterbury doesn't cost the same as a house in Branford.

Neither does the rent. Property taxes can also vary considerably from town to town.

So rather than compare Connecticut-wide numbers, I looked at three-bedroom homes that actually sold and rented in the same town.

Here's how three-bedroom home prices and rents compared in nine New Haven County markets:

Town Single-Family Purchase Single-Family Rent Multifamily Rent Branford ~$550,000 ~$3,500 ~$2,500 Hamden ~$385,000 ~$2,975 ~$2,000 Meriden ~$360,000 ~$2,600 ~$2,000 Milford ~$578,000 ~$3,300 ~$2,825 Naugatuck ~$365,000 ~$2,600 ~$1,900 New Haven ~$365,000 ~$3,250 ~$2,300 Wallingford ~$450,000 ~$2,650 ~$2,363 Waterbury ~$325,000 ~$2,500 ~$1,600 West Haven ~$400,000 ~$3,200 ~$2,300

Your answer starts with where you want to live.

Renting a House vs. an Apartment Changes the Math

Most rent-versus-buy calculators compare the financial cost of a home you might buy with the rent you might otherwise pay. They don't necessarily account for whether those two choices give you the same kind of housing.

If you want a three-bedroom single-family home with a yard, garage and some privacy, we can compare the cost of renting that house with buying something similar.

Assuming 5% annual home appreciation, buying finished ahead of renting a single-family home after five years in seven of the nine New Haven County markets I examined. One slightly favored renting, and another was essentially even.

At 6.5% appreciation, buying finished ahead in all nine.

But a renter doesn't have to rent the house they would otherwise buy.

They could rent an apartment in a multifamily property instead.

Across the data I examined, a three-bedroom single-family rental was roughly $900 per month more expensive than a three-bedroom multifamily rental.

In Waterbury, for example, a three-bedroom single-family rental was about $2,500 per month. A three-bedroom multifamily rental was about $1,600.

That's $900 every month.

Is Renting Cheaper Than Buying in Connecticut?

It can be, especially if you're willing to rent a different type of housing.

The person renting the $1,600 apartment isn't getting the same housing as the person buying a single-family home.

The apartment may be smaller. There may be no private yard or garage, with less storage and privacy.

Someone may willingly give those things up in exchange for spending substantially less on housing.

I compared buying a single-family home with both renting a single-family home and renting a less expensive multifamily unit in the same town.

At 5% annual home appreciation and a five-year stay, a renter choosing the cheaper multifamily option and investing the money they saved finished ahead in eight of the nine markets I examined.

At 6.5% appreciation, the results were much more evenly split. Buying finished ahead in five markets, renting in three, and one was essentially even. Several of those results were close enough that small changes in the assumptions could change the outcome.

At 8%, buying finished ahead in all nine.

Changing what you're willing to rent can completely change the answer without changing where you live.

But there's another assumption hiding in those results.

What Happens to the Money You Save by Renting?

When someone says:

"Renting saves me $900 per month."

What happens to the $900?

Many rent-versus-buy models give the renter credit for the financial advantage created by lower housing costs.

Every month. For years.

They also assume the renter invests the money that would have gone toward the buyer's down payment and closing costs.

That's fair if that's what the renter actually does.

But those are two separate decisions.

Let's go back to Waterbury.

Assume someone has enough money to buy a three-bedroom single-family home for about $325,000 with 10% down.

Instead, they rent a three-bedroom multifamily unit for about $1,600 per month.

The home appreciates 5% annually and both people stay for five years.

The renter invests the money that otherwise would have gone toward buying the house.

Then we change only what happens to the renter's monthly savings.

What the renter does with monthly savings Who finishes ahead after 5 years Invests 100% Renter by ~$33,000 Invests 50% Buyer by ~$12,000 Invests 0% Buyer by ~$56,000

The houses, appreciation rate and renter's initial investment stayed the same.

The only thing I changed was what happened to the monthly savings.

The financial outcome swung by almost $90,000.

A renter who chooses less expensive housing and consistently invests the difference can build substantial wealth.

But cheaper rent doesn't build wealth by itself.

If the monthly savings get spent instead, the investment account assumed by the rent-versus-buy calculation doesn't exist.

Homeownership works differently.

Part of each mortgage payment reduces the loan balance. If the house appreciates, that also builds equity.

The homeowner doesn't have to make a separate decision every month to invest that money.

That doesn't automatically make buying the better decision.

It does mean behavior matters.

How Long Do You Need to Own a Home for Buying to Make Sense?

Buying and selling a house costs money.

For this analysis, I allowed roughly 7.5% of the eventual sales price for brokerage and other seller closing costs.

That's a significant hurdle for someone who buys and sells a few years later.

The longer someone owns the house, the more time appreciation and mortgage principal reduction have to overcome those costs.

That's why renting tends to be more competitive over short periods.

Around five years, buying became considerably stronger when compared with renting similar single-family housing.

Renting cheaper multifamily housing remained much more competitive.

At 6.5% annual appreciation, a renter choosing cheaper multifamily housing and investing all of the savings could still beat buying in some of the markets I examined after five years.

By year ten, buying finished ahead in all nine.

What If Connecticut Home Prices Don't Keep Rising This Quickly?

Nobody knows exactly what Connecticut homes will be worth five or ten years from now.

So I didn't want the answer to depend on one appreciation forecast.

I tested annual appreciation rates of 3%, 5%, 6.5% and 8%.

At 3%, renting cheaper housing and investing the savings was the clear financial winner after five years in all nine markets.

At 5%, that renter finished ahead in eight of nine.

At 6.5%, the results were roughly split between buying and renting, with several markets close to break-even.

At 8%, buying finished ahead in all nine.

Appreciation has such a large effect because a homeowner gets the appreciation on the entire value of the house.

Imagine buying a $400,000 house with $40,000 down.

If the house appreciates 5%, it gains $20,000 in value.

That's only 5% of the home's value, but it's equal to 50% of the buyer's original down payment.

That's leverage.

It works in the other direction if home prices fall.

Connecticut's housing market has experienced unusually strong appreciation while inventory remains extremely limited.

That doesn't guarantee future appreciation.

It's why I tested a range instead of assuming recent appreciation will continue indefinitely.

How I Calculated Rent vs. Buy

There are dozens of variables that can change the calculation, so I needed a consistent starting point.

I used:

Assumption Base Down payment 10% Buyer closing costs 2% 30-year mortgage 6.66% Rent growth 3% annually Investment return 7% annually Selling costs 7.5% Security deposit 2 months Maintenance 1% in year one Homeowners insurance 0.55% in year one PMI 0.5% Property-tax growth 2% annually Home appreciation 3%–8% scenarios

I used actual property-tax information from the MLS for the three-bedroom homes in each town.

Maintenance and homeowners insurance increased 3% per year rather than rising with the home's value.

For renters, the security deposit remained their money but wasn't available to invest while they were renting.

For buyers, I accounted for mortgage principal reduction and the cost of eventually selling the property.

For renters, I gave them credit for investing the money they didn't use for the down payment and closing costs. I then tested what happened when they invested all, half or none of their ongoing monthly savings.

These aren't predictions. Change the town, mortgage rate, down payment, appreciation, holding period or investment behavior, and the answer can change.

So, Should You Rent or Buy a Home in Connecticut?

I don't think there is an honest Connecticut-wide answer.

Where you want to live matters.

What you're willing to rent matters.

How long you expect to stay matters.

And if renting saves you money, what you actually do with those savings can completely change the outcome.

If you're choosing between renting and buying similar single-family housing, buying can become financially attractive within a reasonable holding period.

If you're willing to rent substantially cheaper housing, renting becomes much more competitive.

If you consistently invest those savings, renting can sometimes come out ahead.

But paying less for housing isn't the same thing as building more wealth.

So instead of asking:

"Is it cheaper to rent or buy?"

Ask:

"What would I rent, what would I buy, how long will I stay, and what will I actually do with the difference?"

Those are questions we can actually put numbers to.

Connecticut Rent vs. Buy FAQs

Is it cheaper to rent or buy in Connecticut right now?

It depends on the housing you're comparing. In the New Haven County markets I examined, buying became financially competitive fairly quickly when comparing similar single-family homes. Renting was much more competitive when the renter chose a less expensive multifamily home and invested the savings.

How long should I stay in a house for buying to make financial sense?

There isn't one break-even point for every Connecticut home. Purchase price, rent, mortgage rate, property taxes, appreciation and selling costs all matter. In this analysis, buying became considerably stronger around five years when compared with renting similar single-family housing. By ten years, buying also beat the cheaper multifamily-rental scenario in all nine markets at 6.5% annual appreciation.

Is renting better if I invest the money I save?

It can be. In the Waterbury example, a renter who invested the money they didn't use to buy the home plus all of their monthly savings finished about $33,000 ahead after five years. When that same renter invested none of the monthly savings, the buyer finished about $56,000 ahead. The difference was almost $90,000.