May 5th, 2014
The debate regarding whether it costs less to own or rent a home is ongoing, but consensus tends to be that ownership is more affordable. Previous research from Zillow has supported this assertion, and recent data from the online real estate marketplace has shown that buying a home trumps renting in half of U.S. metros after only two years.
The Zillow breakeven horizon calculates how many years it would take before buying becomes more affordable than renting the same property. In some metros, the span is much wider than others. For example, Washington, D.C., had the longest breakeven horizon during the first quarter of 2014, as it is estimated to take 4.2 years for the transition to occur. In Riverside, California, however, the change can happen in as little as 0.9 years.
“Rising rents and low mortgage rates have helped skew the rent vs. buy decision toward buying for those who can afford it, leaving renters wondering why bother renewing a lease when they may be able to break even on a home purchase in less time,” Zillow said.