Prospective homeowners face
a pleasing condition: In half of U.S. metropolitan areas, buying now beats
renting after a mere two years.
"Rents keep rising, and mortgage rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it," said Stan Humphries, chief economist for Zillow.com, the housing and mortgage firm behind a rent-versus-own study,
Two years is a surprisingly short time to make a home purchase pay off. For many years, the rule of thumb was that you must own a home for four or five years to break even . It takes that long for the home's rising value to offset the various costs, including title insurance and realtor's commission, incurred in the purchase and sale. Renting makes more sense for anyone who does not expect to stay in the home beyond the break-even period.
But prospective buyers benefit from the lower prices. And low mortgage rates allow them to keep their monthly costs down. At the same time, high demand has pushed rents up very fast in many communities. The higher the rent, the sooner owning pays off. Finally, low-interest earnings on safe savings such as bank accounts reduce the gains renters can enjoy on cash that is saved instead of being put into a down payment on a home.
"Rents keep rising, and mortgage rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it," said Stan Humphries, chief economist for Zillow.com, the housing and mortgage firm behind a rent-versus-own study,
Two years is a surprisingly short time to make a home purchase pay off. For many years, the rule of thumb was that you must own a home for four or five years to break even . It takes that long for the home's rising value to offset the various costs, including title insurance and realtor's commission, incurred in the purchase and sale. Renting makes more sense for anyone who does not expect to stay in the home beyond the break-even period.
But prospective buyers benefit from the lower prices. And low mortgage rates allow them to keep their monthly costs down. At the same time, high demand has pushed rents up very fast in many communities. The higher the rent, the sooner owning pays off. Finally, low-interest earnings on safe savings such as bank accounts reduce the gains renters can enjoy on cash that is saved instead of being put into a down payment on a home.
"Among the 35 largest metro areas analyzed by Zillow in the
first quarter, those with the shortest breakeven horizon were Riverside (less
than 1 year), Orlando (1 year), Tampa (1.1 years) and Miami-Fort Lauderdale
(1.2 years)," Zillow said, referring to locations in California and Florida.
"Large metros with the longest breakeven horizon included Washington, D.C.
(4.2 years), Boston (4 years), Phoenix (3.3 years), San Diego (3.2 years),
Minneapolis and Baltimore (both 3.1 years)."
Zillow cautions that break-even periods can vary considerably within any given city.
No comments:
Post a Comment