For renters, buying a home pays off after three years on average
A new analysis by real estate website Zillow shows that, on average, a renter thinking about buying a home will reach what it calls the “break-even horizon,” after just three years. The break-even horizon compares what it would cost to buy or rent the same home in a number of U.S. markets over time.
Making sense of the story
- The analysis takes into account a host of factors potential buyers should think about when considering a home purchase, including the down payment, mortgage and rental payments, buying and selling costs, property taxes, utilities, maintenance costs, and tax deductions. The analysis adjusts for inflation and forecasts home value and rental price appreciation.
- Zillow said that the data
should help homeowners get a rough and immediate sense of whether buying
makes sense in a particular area in relation to their financial situation.
- Additionally, many analysts
believe that a housing bottom has been reached, which may help renters
determine if now is the right time to buy. However, analysts also say they
are not expecting home prices to return to the same levels as during the
real estate bubble.
- There is also some concern about the strength
of the housing recovery, with home sales slowing in June as inventory
remained tight and buyers paid higher prices. At the same time, rents are
rising, housing affordability is at record levels, and mortgage interest
rates remain very low. These factors are prompting many renters to
consider homeownership.
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