Survey Finds Benefits of Buying a Home Outweigh Renting
In half of U.S. metros, buying a home is a better financial decision than renting for homebuyers who plan to stay in their home for at least two years, according to the first quarter Zillow breakeven horizon analysis. Among the 35 largest metro areas analyzed by Zillow in the first quarter, those with the shortest breakeven horizon were Riverside (less than one year), Orlando (one year), Tampa (1.1 years) and Miami-Fort Lauderdale (1.2 years). Large metros with the longest breakeven horizon included Washington, D.C. (4.2 years), Boston (four years), Phoenix (3.3 years), San Diego (3.2 years), Minneapolis and Baltimore (both 3.1 years).
Because conditions for buyers and renters can vary dramatically even within cities themselves, Zillow produces breakeven horizons down to the neighborhood level in order to give potential buyers and renters the most insight into local conditions where they're considering living. For example, the breakeven horizon for the city of San Francisco is 2.8 years, but home shoppers who purchase in the Bayview neighborhood will break even after 1.4 years, while those who buy in Presidio Heights will need to stay in their home 11.7 years for buying to be a better financial decision.
"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 downpayment on a house, renting can be a more flexible, and often far less frustrating option."
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