When you buy a home, you lock up a large lump sum (e.g. 20% down payment) as home equity. A renter can invest that same lump sum in index funds. Since stocks historically earn a higher return than real estate appreciation (e.g., 8% vs. 4%), the renter's invested capital can often outgrow home equity over short periods.

The 5-year rule suggests that you should generally rent if you plan to live in a home for less than 5 years. This is because the upfront buying friction costs (closing costs, inspection fees) and selling friction costs (realtor commissions, transfer taxes) take about 5 years of home appreciation to break even.

It depends heavily on your local market, rent costs, and your savings discipline. In high-cost housing markets, renting and consistently investing the monthly savings difference yields a higher net worth. In low-cost markets, buying is a powerful wealth generator because it acts as 'forced savings' through mortgage principal paydown.