Buying Home Beats Renting After Just 3 Years in Much of US

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Is it better to buy a home or rent? An analysis released on Thursday by real estate information provider Zillow.com finds that in most of the U.S., buying becomes a better deal than renting after only three years of residence.

In many metro areas, the advantage comes much sooner. In Miami, Fort Lauderdale, and Tampa, for example, owning beats renting after 1.6 years, the study finds.

Zillow determined the breakeven horizon -- the point at which owning becomes more financially advantageous than renting the same home -- for more than 200 metro areas and 7,500 cities around the U.S.

Unlike a simple purchase price-to-rent ratio, the breakeven horizon takes into account such other data as taxes, tax deductions, down payments, utilities, appreciation, maintenance, opportunity costs and fluctuations in the rental market.

"People traditionally have looked at the price-to-rent ratio," Zillow senior economist Svenja Gudell told ABC News. "But that's not comparing apples and apples. Our calculation takes into account all costs, plus tax deductions and inflation. It would be very hard for the average consumer to crunch these numbers."

The shortest breakeven horizons occur in markets such as Florida's, where home values fell farthest during the recession. The ownership advantage there kicks in after less than two years. In other markets, however, where values have held, the advantage comes far later. In San Jose, Calif., for example, the time is a little over eight years. San Jose had the longest breakeven horizon of any of the 30 largest metro areas Zillow studied.

Read More: WLS


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