For decades, I was taught that buying a home was a smarter financial move than renting one. Buying was a way to build wealth, while renting was “a waste of money.”
I’ve gradually learned that the buy-versus-rent debate is much more nuanced than that. Everyone’s situation is different, from their finances to their stage in life.
But the Zillow September 2026 Forecast just shed a whole new light on renting. The real estate technology group predicts that home sales will fall by the end of 2026, and rentals will grow.
The shift is significant because a weaker buying market and higher mortgage costs are making the financial case for renting — and investing the difference — more compelling for some households.
“For those not yet ready to buy, renting remains a compelling option and an opportunity to build savings,” wrote Mischa Fisher, chief economist for Zillow Group.
Zillow predicts weaker home sales, stronger rental market
In its September forecast, Zillow predicted that year-over-year existing-home sales would fall by 3.5% in Q4 2026.
Keep in mind that this anticipated drop can’t be chalked up to the housing market typically slowing in winter months. This is a year-over-year comparison, meaning Zillow expects Q4 2026 existing-home sales to be 3.5% lower than Q4 2025. That’s a slowdown compared to August’s prediction of a 3.2% decline.
In early 2026, Zillow predicted existing-home sales would increase by 4.7%.
So, what changed? We could nitpick every little thing that has happened to the housing market in 2026, but the short answer is: mortgage rates.
“As our earlier forecasts predicted, and our latest forecast confirms, we’re expecting existing home sales to continue to decline year-over-year for the rest of 2026, under the weight of high mortgage rates,” Fisher wrote.
At the beginning of the year, Zillow had also predicted 6.07% mortgage rates for Q4. But the company didn’t foresee the geopolitical tensions that would impact almost every facet of the housing market.
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For the most part, Freddie Mac mortgage rates have been increasing since the U.S. and Israel attacked Iran at the end of February. As of Thursday, Sept. 17, the average 30-year fixed mortgage rate was 6.95%.
As mortgage rates inch closer to 7% — and are already above 7% for some Americans — it is becoming harder for many people to buy homes. If rates stay high in Q4, this will inevitably continue to hurt the housing market.
Zillow’s existing-home sales predictions are discouraging for buyers. But the same forecast offers a different picture for renters.
At the start of the year, Zillow predicted 0.3% annual rent growth in Q4. Now, the company has projected a 2.1% year-over-year rental increase.
Renting is becoming more financially attractive
My years of hearing that renting was a waste of money seemed even more off-base when Zillow broke down how much the typical homebuyer could save in a year by renting instead of buying.
Of course, housing and rental costs vary by market. But the Zillow Observed Rent Index found that the typical American renter paid $1,948 in August 2026.
Meanwhile, the typical monthly housing payment (including the mortgage principal, interest, taxes, and insurance) was $3,014.
That means the typical renter paid $1,066 less per month than the typical homeowner. Multiply that by 12, and Zillow’s findings mean a renter could save $12,792 in one year compared to an owner.
Zillow said those who invested that amount at the 10-year Treasury yield (4.68% in August) would earn $322 more in the first year.
“Assuming rents and home buying costs remain stable, that could turn into a cumulative total of $72,000 after five years — real wealth built without the hidden costs of homeownership like closing costs, maintenance and more,” Fisher wrote.
This is assuming that the renter continued to invest their savings from renting each year.
When mortgage rates are high and the cost of owning substantially exceeds the cost of renting, renting can be a financially viable alternative. Particularly for people who invest the difference.
Related: Zillow predicts mortgage rate, housing market change
