econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 26 July 2015

The Decision To Buy Vs. Rent A Home Breakeven

by Zillow

The decision to buy a home or rent is very personal, and depends heavily on your distinct social circumstances and financial situation. But we have found that a rough idea for when buying a home may become better than renting it can help inform the choice, especially when so much emotion and so many moving pieces are involved.

Zillow's Breakeven Horizon estimates the number of years you would have to live in a home before buying it would become more financially advantageous than renting it. We make some basic assumptions[i] and bake in common costs associated with renting and buying, including down payments, security deposits, taxes and fees. The result is a comprehensive look at how long you'll need to stay in a home in a given area before the total costs of renting, offset by investments in stocks or bonds, surpass the costs of owning as equity builds (figure 1).

For example potential buyers looking to buy a home in the Washington, D.C., area, should expect to stay in that home for 4.5 years before buying it will become more financially advantageous than renting it. Potential buyers in the Dallas-Fort Worth area will only need to live in a home for 1.1 years before the costs associated with renting overtake the costs associated with owning that home. Nationwide, the breakeven horizon (on a median-valued U.S. home) is currently 1.9 years.

General rules of thumb say that if you'll only live in a home for a short time, it's cheaper to rent. And in many cases - but not all - those rules hold true (depending on your definition of a "short" time frame). Buying a home often requires very large upfront costs in a down payment and closing costs, and significant investments over time in taxes and maintenance.

In a healthy market, you'll get your down payment back in the form of home equity over time. Yes, transaction costs, property taxes and mortgage interest payments (among other costs) are gone forever. But as time goes by, your home's value will typically grow, and a larger and larger share of your monthly mortgage payments pay down the principal on your loan. Growing home equity, over time, offsets many costs.

Rent, like some of the costs of homeownership, is also paid and gone for good. But as a renter, there is opportunity to invest the savings you otherwise would have used to purchase a home in a different asset, like stocks or bonds. The gains realized from these assets can often offset monthly rent payments.

But remember - everyone's circumstances are different, and there is no universal right or wrong answer that will work for all of us.

[i]These assumptions include a home buyer purchasing a home with a 30-year, fixed-rate mortgage and a 20 percent down payment; and a renters earning 5 percent annually on investments in the stock market.

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Was Marx Right?
Angst in America, Part 5: The Crisis We Can’t Muddle Through
News Blog
May 2017 Economic Forecast: Return to Normal Growth
Guanxi: How Business Is Done In China
Measuring Interest Rate Risk In The Very Long Term
2016 Small Business Credit Survey: A Significant Majority Relied On Personal Finances
How Economic Changes Affect Congressional Budget Office's Budget Projections
Three Public Relations Blunders And How Your Company Can Learn From Them
Infographic Of The Day: Cheat Sheet: NAFTA's Mixed Track Record Since 1994
Early Headlines: Trump Blames Dems And Constitution For Chaos, US Child Poverty, Winter Leaves North New England, Labour Gains In Polls, And More
Grading President Trump's First 100 Days: B!
The Most Important Gaming Platforms 2017
Earnings And Economic Reports: Week Starting 01 May 2017
Ancestors Of Flores 'Hobbits' May Have Been Pioneers Of First 'Human' Migration Out Of Africa
The Global Top 10 Android Apps
Investing Blog
Technical Thoughts: Finding Contrarian Ideas
More People Have Access To Netflix Than A DVR
Opinion Blog
Investors: Super Size Me
How Our Addiction To Safety Could Lead To Another Financial Crisis
Precious Metals Blog
A New Age For Gold
Live Markets
28Apr2017 Market Close: Wall Street Closed Mostly Down On News The U.S. Economy Grew At Its Weakest Pace In Three Years, WTI Crude Settles In The Low 49 Handle
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved