In Most of U.S., Buying Beats Renting After Only Two Years

Time it takes to break even on a home purchase varies from neighborhood to neighborhood, ranging from months to years, according to Zillow analysis

News provided by

Zillow, Inc.

Apr 30, 2014, 08:00 ET

SEATTLE, April 30, 2014 /PRNewswire/ -- In half of U.S. metros, buying a home is a better financial decision than renting for home buyers 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 1 year), Orlando (1 year), Tampa (1.1 years) and Miami- Fort Lauderdale (1.2 years). Large metros with the longest breakeven horizon included Washington DC (4.2 years), Boston (4 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 down payment on a house, renting can be a more flexible, and often far less frustrating option."

Zillow's breakeven horizon incorporates all costs associated with buying and renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, insurance, taxes, utilities, maintenance, and renovation costs. We also consider the different asset streams available to buyers and renters. For buyers, the home equity grows. Alternatively, renters can invest some of the money they would spent on a home purchase and earn interest. It then factors in historic and anticipated home value appreciation rates, rental prices and rental appreciation rates.

To determine the breakeven horizon in your city or neighborhood, use our interactive tool on Zillow Research here.

Top 35 Metro Areas Covered By Zillow		ZIP code-level variance w/in larger metro (years)
Metro Name	Overall Metro Breakeven (Years)	Low	High
New York/Northern New Jersey	2.7	0.7	31
Los Angeles, CA	2.4	0.9	31
Chicago, IL	2.3	0.7	31
Dallas-Fort Worth, TX	1.4	0.5	19.2
Philadelphia, PA	2.9	0.5	8.9
Houston, TX	1.5	0.8	12.3
Washington, DC	4.2	1	11.5
Miami-Fort Lauderdale, FL	1.2	0.5	6.8
Atlanta, GA	1.4	0.4	3.5
Boston, MA	4.0	1.6	16.1
San Francisco, CA	2.6	0.7	10.8
Detroit, MI	1.5	0.6	6.8
Riverside, CA	0.9	0.6	7
Phoenix, AZ	3.3	0.9	8.6
Seattle, WA	1.9	1	15.7
Minneapolis-St Paul, MN	3.1	1.2	5.7
San Diego, CA	3.2	1.1	9.8
St. Louis, MO	2.1	0.6	6.3
Tampa, FL	1.1	0.5	4.4
Baltimore, MD	3.1	0.4	24.9
Denver, CO	2.6	1.2	4.5
Pittsburgh, PA	1.9	0.6	8.7
Portland, OR	2.2	1.2	4.5
Sacramento, CA	1.6	0.9	12.9
San Antonio, TX	1.8	1.4	4.8
Orlando, FL	1.0	0.5	2.4
Cincinnati, OH	2.2	0.7	4.5
Cleveland, OH	2.0	0.6	3.9
Kansas City, MO	2.2	0.7	4.8
Las Vegas, NV	1.5	0.7	5.6
San Jose, CA	2.8	1.4	6.3
Columbus, OH	2.5	0.8	3.6
Charlotte, NC	2.2	1	5.3
Indianapolis, IN	1.8	1	4
Austin, TX	2.1	0.9	4.6

About Zillow:
Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. The Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgage Marketplace, Zillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Agentfolio®, Mortech®, HotPads™ and StreetEasy®. The company is headquartered in Seattle.

Zillow.com, Zillow, Postlets, Mortech, Diverse Solutions, StreetEasy, Agentfolio and Digs are registered trademarks of Zillow, Inc. HotPads is a trademark of Zillow, Inc.

SOURCE Zillow, Inc.