Zillow: Buying a Home Beats Renting After 2 Years
An article by Colin Robins, of DSNews.com, May 1, 2014:
Zillow’s break-even horizon analysis came to an interesting conclusion: in half of U.S. metros, buying a home is a better financial decision than renting for buyers intending to stay in their home at least two years. The company’s analysis includes all costs associated with buying versus renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, taxes, utilities, maintenance, and renovation costs.
The group also takes into account different asset streams associated with different housing situations. For example, a buyer’s home equity is factored into the final figure, while a renter’s ability to invest some of the money they would have spent on a purchase is factored into the final figure for comparison.
“Rents keep rising, and mortgage interest rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it. Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas,” said Zillow Chief Economist Dr. Stan Humphries.
“However, some renters still have to overcome significant hurdles before they can pull the trigger on homeownership. For those renters who can’t qualify for a mortgage or aren’t able to save enough for a down payment on a house, renting can be a more flexible, and often far less frustrating option,” Humphries added.
Metros with some of the shortest break-even times include Riverside, California (less than 1 year); Orlando, Florida (1 year); Tampa, Florida (1.1 years); and Miami-Fort Lauderdale, Florida (1.2 years).
Large metros with the longest break-even time include Washington, D.C. (4.2 years); Boston, Massachusetts (4 years); Phoenix, Arizona (3.3 years); San Diego, California (3.2 years); and both Minneapolis, Minnesota and Baltimore, Maryland (3.1 years).