In almost two-thirds of metropolitans throughout the country, buying a home is a better financial decision than renting for consumers who plan to live in the property for at least three years.
In their analysis, Zillow incorporated all
The Seattle-based real estate information provider found that the Southwest and Midwest were the best markets for homebuyers to quickly recoup buying costs. Conversely, the Northeast corridor is a better option for long-term renters.
Among the 30 largest markets Zillow tracked in the first quarter, those with the shortest breakeven horizon were Miami and Detroit at two years with Phoenix right behind at 2.1 years.
Meanwhile, New York led all cities at 5.2 years to break even between buying and renting costs, followed by Boston at 4.1 years and San Jose would take 3.7 years, Zillow said.
“Locally high home value appreciation in many areas, combined with historically low mortgage rates and low home prices relative to recent peaks, has made buying a home a more advantageous financial decision than renting for many would-be buyers,” said Stan Humphries, chief economist for Zillow.
The breakout horizon is primarily impacted by the expected rate of home value increases in a given area. For example, in cities where home values are forecasted to rise more quickly in coming years, the time it takes to recoup upfront costs will be lower and therefore the breakeven period will be shorter. The opposite goes into effect if home values are projected to surge at a slow pace in a specific market.
“Even in areas with relatively low breakeven horizons, buyers should resist the temptation to buy and sell properties based only on short-term goals,” Humphries added. “And renters in these areas should never feel compelled to stretch themselves to buy if it is currently beyond their means.”
