Buying Vs. Renting In New Jersey: A Multi-Variable Financial Model, Sensitivity Analysis, And Monte Carlo Simulation Of Long-Term Wealth Outcomes

Abstract

Three concurrent disruptions have altered the rent-vs.-buy calculus for New Jersey households: median home values reached $569,314 in 2026, mortgage rates doubled from 3% to over 7%, and annual property-tax bills routinely exceed $10,000. This study tests under which conditions purchasing a home in NJ generates greater long-term wealth than renting and reinvesting the difference, and whether existing policy instruments target the variables that most strongly govern that outcome. A 14-variable financial model was calibrated to current NJ data from Zillow, ATTOM, and FRED. Sensitivity analysis ranked all variables by impact on the buyer-minus-renter wealth difference, and Monte Carlo simulation with 10,000 trials modeled outcome uncertainty under correlated distributions across six counties and two return assumptions. We found that holding period, property price, and monthly rent are the dominant outcome drivers regardless of return assumption: under a conservative 8% annual investment return, buying outperforms renting in all six counties within 3–10 years, while under a historical 13.5% return, renting dominates in five of six counties. The SALT deduction cap ranked last among all ten variables tested, with an impact range of approximately $98,000—one-thirty-fifth that of holding period. These results suggest that current NJ homeownership tax policy is misaligned with the variables that most strongly determine wealth outcomes, and that policy instruments targeting mortgage rate access, transaction cost reduction, and housing supply are better positioned to influence the rent-vs.-buy decision than existing tax deductions.

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