According to a new analysis by Zillow, buying is a better financial decision than renting for most buyers who intend to live in a home for at least three years.
Zillow analyzed the “breakeven horizon” in more than 200 metropolitan areas and 7,500 U.S. cities to determine how many years it would take before owning a home becomes more financially advantageous than renting the same home. In more than 75 percent of the metro markets analyzed, a homeowner would break even after three years or less of owning a home.
All possible costs associated with buying and renting were incorporated into the analysis, including downpayment, mortgage and rental payments, transaction costs, property taxes, utilities, maintenance costs, tax deductions and opportunity costs, while adjusting for inflation and forecasted home value and rental price appreciation.
In some metro areas where home values fell dramatically during the housing recession, homebuyers break even after less than two years of owning a home. The Miami-Ft. Lauderdale metro is among the most favorable for buying, with homeowners breaking even after only 1.6 years of living in the home. However, in the San Jose metro area, where home values are among the highest in the nation, a buyer must commit to living in their home for 8.3 years before they will break even.
“Across most of the country, historic levels of affordability make buying a home a better decision than ever, especially considering rents have risen more than five percent over the past year,” said Stan Humphries, Zillow chief economist. “This is the first analysis of metros and cities that presents the buy versus rent decision in an intuitive way, by telling consumers how long they must live in the home before buying breaks even with renting financially. It’s much more understandable, and therefore useful, than the abstract notion of a simple ratio of prices to rents. If we want consumers to act on market information, we have to align it with how they think about the issue and make it straight-forward to grasp.”
Are you looking to make the leap from renting to home ownership? Here are some additional links regarding the benefits of home ownership that you may find useful:
- Tips for First Time Home Buyers
- First Time Home Buyer Mistakes I
- First Time Home Buyer Mistakes II
- First Time Home Buyer Advice
Are you ready to discuss your home financing options with a licensed mortgage professional? Contact an Inlanta Mortgage loan professional near you.
Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs here.
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