Rates are above 7%. Is renting a better option?

Mortgage rates hit 7.40% on October 8, according to Freddie Mac. That's the highest since November 2023.

When rates climb like that, a lot of renters decide buying is off the table for now. Before you make that call, there's one number worth checking first.

What is the price-to-rent ratio?

Take the price of a home and divide it by one year of rent for a similar home. That's it.

Brad Case, an economist with Homes.com, recently looked at buyers from the mid-1990s, when mortgage rates ran between 7% and 9%. He compared people who bought with people who rented and invested the money they saved. Here's what he found:

• Homes under about 14 times a year's rent usually made buying the better deal.
• Homes between 14 and 20 times rent were a toss-up.
• Homes over 20 times rent usually made renting and investing the better deal.

His point is that the rate alone doesn't decide it. The price compared with rent matters more.

Where does Prince George's County land?

Take a typical 3-bedroom, 2.5-bath townhome. Here in Prince George's County, it sells for about $430,000. From what we're seeing, a home like that rents for about $3,100 a month.

That works out to about 11.6 times a year's rent, comfortably under the line where buying usually came out ahead.

What does that look like month to month?

Most buyers here don't put 20% down, so let's use 5%.

Say you buy that $430,000 townhome with $21,500 down at today's average rate of 7.40%. Your principal and interest would run about $2,828 a month. With less than 20% down, you'll also pay mortgage insurance, about $200 a month. Add about $395 for property taxes and about $125 for insurance, and you're near $3,550.

That's about $450 a month more than renting the same home.

But in the first year, about $320 a month of your payment pays down your loan. That money stays with you. Rent doesn't. So the real gap is closer to $130 a month.

Your principal and interest also stays the same for 30 years. Rent can go up. And once you reach 20% equity, the mortgage insurance can come off.

To be fair, owners also pay for repairs, and renters don't. That's part of the math too.

How does that compare with DC?

The same townhome in Washington, DC sells for about $860,000 and rents for about $4,500 a month. That's about 16 times a year's rent, which puts it in toss-up territory.

With 5% down, owning it would run about $6,850 a month. That's about $2,350 more than renting, and about $1,700 more even after you count what goes to principal.

DC's property tax rate is actually a little lower than Maryland's, about 0.9% compared with 1.1%. The price is what changes the answer.

One more thing about down payments

Case's study assumed buyers put 20% down. With 5% down, you pay more interest and mortgage insurance, so the line moves a little in renting's favor. Even so, Prince George's still sits well under it.

If you don't have 5% to put down, down payment assistance can help. Prince George's County has programs that cover up to $50,000 for buyers who qualify.

When does renting still make sense?

If you plan to move again in 2 or 3 years, renting often wins. Buying and selling both cost money, and a short stay doesn't give you time to make it back.

There's one more catch. Buyers in the '90s got to refinance as rates fell over the next 20 years. That may happen again, but nobody can promise it. So a home near the line, like many in DC, is closer to a toss-up than history suggests.

So should you rent or buy?

It depends on your price range, your down payment and how long you plan to stay. Those are exactly the numbers we look at.

Our team sees this from every side. We help people buy, we help them finance, and we manage rentals, so we know what homes here actually rent for.

If you're renting and wondering whether buying makes sense for you, call or text our office at 240-255-9027. We'll set up a brief 15 minute call with me or another member of The Heyward Homes Team and run your numbers.

Source: Brad Case, "Analysis: Buying can still beat renting, even with mortgage rates above 7%," Homes.com, October 5, 2026. Rates from Freddie Mac's Primary Mortgage Market Survey, week of October 8, 2026. Prices and rents are estimates for 3-bedroom, 2.5-bath townhomes. Payment examples are for illustration only and are not a quote or an offer of credit. They assume 30-year fixed-rate conventional loans of $408,500 and $817,000 with 5% down. Mortgage insurance, taxes and insurance are estimates and vary by credit, location and property.