There’s always a debate about which is better financially – renting a home or buying one. While there will always be differing opinions on the matter, there is some new information that may help answer the questions or at least help you make a decision about which one is best for your situation.
In a recent study by Zillow.com of more than 7,500 cities in the United States including 224 metropolitan areas, researchers were looking for a “breakeven point” at which the cost of buying a home is a better financial decision than the cost of renting a home or apartment. In more than 75 percent of the cities and metropolitan areas, that point of breaking even was right around three years.
Three years, however, is just an average figure. In 7 percent of the cities that were included in the study, it took five years or even longer to reach the point of being a financial benefit. Some of the more popular cities where it takes longer to break even are located in California, including Santa Cruz, San Jose, San Luis Obispo and other. Oak Harbor, Washington is also on the list of cities where it takes five years or more for it to be financially beneficial to purchase a home.
On the other hand, there are some cities on the low end of the spectrum. In a few cities, it only takes 1.6 years to reach the break even point. Some of those cities include Miami, Mobile, AL, Tampa and Memphis. Red Bluff, CA and Salisbury, MD are also included in that list.
According to some analysts, these numbers have not always been that way. With mortgage rates and home affordability at historic lows, it is becoming more beneficial to purchase a home these days. Also, combine that with the average 5 percent increase in rent across the country in the past year, renting has become less of a benefit than it has been in years past. The study is also the first of its kind which studies the numbers and tells people the actual amount of time that living in a home becomes beneficial over renting. It’s also different than previous studies which only included the price-to-rent ratio because the current study used the overall cost of home ownership.
According to an article this year in the New York Times, today’s average home price in many areas across the country have reached the same levels that they were at in 2004. The values of these homes are also expected to increase by about 1 percent between now and next year. If you can get financing and you are tired of renting, this may be the best time for you to try to purchase a home if you can get financing for it.