Buying a home in the us is cheaper than renting

Photo credit: Cyndie

Buying a home in the US is cheaper than renting, according to Zillow. Measured over two years, the cost of getting on the housing ladder is more affordable than renting out a home.

This is true of roughly 70 per cent of all US metros, thanks to low interest rates, healthy home value forecasts, and the relatively fast pace of rents in recent years.

However, there are regional variations, as the market recovery continues at different paces in different parts of the country; home buyers in Boston, New York, and Washington, D.C., for example, would have to live in a home for at least three years to break even on a purchase, and buyers in the Bay Area would have to stay nearly that long to make buying financially advantageous.

The shortest Breakeven Horizon is in Dallas, where buyers would have to live in a home for 1.3 years to save money compared to renting.

Around the country over the last year, the Breakeven Horizon quickened in most of the Midwest and Southeast as well as in the Northeast corridor from New York to Boston.

However, the decision to buy may not be so simple for millennials – whose first jobs often take them to job centres with relatively high Breakeven Horizons. Boston, one of the nation's youngest cities, has a Breakeven Horizon of just over three years. San Francisco's Breakeven Horizon is 2.9 years, up from 2.6 years in the fourth quarter of 2014. Both markets are attracting young people following jobs, and many of those remain renters despite record-high rental costs.

"Even with record-high rents in job centers like San Jose, Boston and Washington, D.C., 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," observes Zillow Chief Economist Svenja Gudell.

In general, rents are flattening across the country and expected to continue to stabilise, a factor that could lengthen the Breakeven Horizon as homes continue to appreciate.