Inventory
info icon
Single family homes on the market. Updated weekly.Powered by Altos Research
735,718-296
30-yr Fixed Rate30-yr Fixed
info icon
30-Yr. Fixed Conforming. Updated hourly during market hours.
6.94%0.01
Real Estate

Zillow: Rent vs. buy break-even point falls by a month in Q1

The average time it takes to make homeowning make sense fell a bit in Q1

According to a report by Zillow, the average time it takes for owning a typical U.S. home to make more financial sense than renting that same home is down by about one month over last quarter. The new average is 1.96 years. That means it would take roughly one year and 11 months for it to make more sense to own a home in the U.S. than to rent that same home.

Not surprisingly, break-even horizons are longest in expensive coastal markets like Los Angeles, Portland and Washington D.C. This translates to a roughly two to three-year break-even horizon. Los Angeles has the longest breakeven horizon at 3.7 years.

The shortest break-even horizons are in the Southeast, with Memphis taking first place at 1.32 years. Birmingham, Tampa and Orlando are other markets with notably short break-even horizons.

Obviously, the main factor in determining the break-even point is home prices in any given area. Hence Los Angeles’ long horizon, and Memphis’ short horizon. However, there are other complicating factors such as the state of the local rental market and interest rates, so keep that in mind as you take a look at the interactive report.

Also, Zillow’s report is based on a number of assumptions that are important to note. Here they are:

For buying the report assumes:

  • A 20% down payment
  • Monthly payments on a 30-year fixed rate mortgage at the current interest rate for people with credit ratings between 680 and 740
  • Property taxes
  • Homeowner’s insurance
  • 3% purchase costs
  • 8% selling costs (because that’s how owners realize the gains)
  • Annual maintenance costs equal to 1% of the home’s value
  • For condos, 1.2% a year in HOA fees
  • Home appreciation forecasts
  • Federal tax deductions

For renting the report assumes:

  • A deposit equal to one month’s rent
  • Rent payments
  • Renter’s insurance
  • 5% annual investment gains on money that would have been used as a down payment or gone towards other homeowner expenses the renter avoids

 

Most Popular Articles

Latest Articles

Lower mortgage rates attracting more homebuyers 

An often misguided premise I see on social media is that lower mortgage rates are doing nothing for housing demand. That’s ok — very few people are looking at the data without an agenda. However, the point of this tracker is to show you evidence that lower rates have already changed housing data. So, let’s […]

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please