Photo: Matt Biddulph/Flickr
So you’ve saved for a down payment and are ready to take the plunge into homeownership — should you?
To help potential buyers make up their minds, popular online real estate marketplace Zillow has crunched some numbers in 35 of the biggest US housing markets.
Zillow compared the cost of owning and renting for each year over a three-decade period.
All things considered, on a long enough timeline, buying makes more sense in every market Zillow looked at.
It takes under two years for homeowners in 70 percent of US metro areas to “break even” on their purchase, according to Zillow, which cites “low interest rates, healthy home value forecasts, and the relatively fast pace of rents in recent years.”
In the study Zillow counted on buyers shelling out a 20 percent down payment on a 30-year fixed-rate mortgage at a rate of 3.56 percent.
The methodology also figured in factors like property taxes, and maintenance and reno costs for owners.
Tenants, on the other hand, were assumed to fork over 3 percent more on rent every year. A 1 percent broker fee, rent insurance, and deposit were accounted for, too.
Owners and renters alike are assumed to pay for their own utilities.
Of all markets examined, the one in which homeowners would break even the fastest was in Dallas, where it would take 1.3 years.
However, as Zillow also points out, young workers aren’t at the same job for very long on average.
And in some of the hottest job markets, the breakeven point lurches towards the average tenure for employees aged 25 to 34, which was three years in 2014, according to the US Department of Labour.
“Even with record-high rents in job centers like San Jose, Boston and Washington, DC, putting off a home purchase might be the best financial decision for a young person who has saved enough for a down payment, depending on how long they intend to stay in their jobs and homes,” Svenja Gudell, Zillow’s chief economist, said in a statement.
This chart of the break-even point for 30 major metro areas should help you decide whether it’s time to go home hunting: