Sending in that rent check every month can feel like you?re flushing money down the drain. You?re paying for a roof over your head, but it?s hard to compete with buying a home and building equity.
But as it turns out, renting for a few years may make perfect financial sense.
Zillow?s break-even horizon metric measures the number of years after which buying a home is more financially advantageous than renting. This period of time is calculated by comparing the net costs of buying a house with the costs of renting the same home. From here, average and median break-even horizons are computed at the city and metro levels.
Based on Zillow?s break-even horizon data and average home values across the U.S., here?s a look at the top 10 big cities where renters have the edge:
No. 10: Nashville, Tenn.
Break-even horizon: 2.6 years*
Zillow Rental Index: $1,190*
Annual change in Zillow Rent Index: 3.8 percent*
The Nashville housing market has held up fairly well, but it still takes 2.6 years before buying pays off more than renting. The Zillow Home Value Index increased 6 percent year-over-year to $140,000 in December 2012. Meanwhile, the Zillow Rent Index (ZRI) was up 3.8 percent. By comparison, Memphis home values were down 3.5 percent, and rental rates were flat, according to Zillow Chief Economist Stan Humphries.
No. 9: Austin, Texas
Break-even horizon: 2.7 years*
Zillow Rental Index: $1,516*
Annual change in Zillow Rent Index: 6.2 percent
As 2012 came to a close, the Austin real estate market continued to improve with a median home value of $209,900, a 4.7 percent increase. The rental market also looked favorable with the ZRI reporting a 6.2 percent rise.
No. 8: Denver, Colo.
Break-even horizon: 2.8 years*
Zillow Rental Index: $1,468
Annual change in Zillow Rent Index: 9.3 percent
Denver is seeing double-digit growth in its median home value, up 14.1 percent to $233,700 as of December 2012. While the Denver housing market is doing well, it takes 2.8 years for owning a home to make the most financial sense. In the meantime, the skiing and dining mecca is a renter's paradise.
No. 7 (tie): San Jose, Calif.
Break-even horizon: 3.3 years*
Zillow Rental Index: $2,513*
Annual change in Zillow Rent Index: 4.5 percent
Humphries says that with more than 6,600 technology companies in San Jose, people prefer to buy. With a median annual income topping $92,500 and a median home value of $544,600, buying a home in San Jose is definitely in the cards. But with the housing market doing well, the break-even horizon in San Jose is unsurprisingly more than three years. For technologists moving to Silicon Valley for the first time, it makes financial sense to rent until you know you?ll be in tech central for longer than 3.3 years.
No. 7 (tie): Los Angeles, Calif.
Break-even horizon: 3.3 years*
Zillow Rental Index: $2,311*
Annual change in Zillow Rent Index: 2.3 percent
Tied with San Jose, the Los Angeles market has the same break-even horizon of 3.3 years. However, the two California markets are quite different. While San Jose is benefiting from a high employment rate, unemployment dominates in L.A. Home prices also fell about 35 percent from peak to trough, making L.A. overall more affordable for home buyers, Humphries says. This doesn?t mean it?s cheap, though. The median home value was still up 9.7 percent at $399,800 as of December 2012.
No. 6: San Diego, Calif.
Break-even horizon: 3.4 years*
Zillow Rental Index: $2,116
Annual change in Zillow Rent Index: 2.9 percent
Beach living just got brighter with the median San Diego home value up 11 percent from a year ago at $404,100. ?If you want to move into housing, it looks more affordable now than it has in the past,? Humphries said.
No. 5: Portland, Ore.
Break-even horizon: 3.6 years*
Zillow Rental Index: $1,423*
Annual change in Zillow Rent Index: 8.6 percent
Homes sold at a loss: 21.49 percent
The No. 1 city for bike commuters in the U.S., Portland is home to a new wave of urban dwellers.This is fitting considering that Portland is a city where it is in your favor to rent. Meanwhile, the median home value in the city rose 8.8 percent to $257,400.
No. 4 (tie): Washington, D.C.
Break-even horizon: 3.7 years*
Zillow Rental Index: $2,439*
Annual change in Zillow Rent Index: 7 percent
According to Humphries, the Washington, D.C., housing market is seeing a lot of new construction interest, both in single-family and multifamily homes. This is not surprising considering the area?s government jobs, as well as thriving health care, education and military institutions. The median home value was $402,400 as of December 2012, a 10-percent increase from the previous year.
No. 4 (tie): San Francisco, Calif.
Break-even horizon: 3.7 years*
Zillow Rental Index: $3,281*
Annual change in Zillow Rent Index: 12 percent
On par with Washington, D.C., San Francisco is also a thriving market. Perhaps unsurprisingly, the median home value tops all cities on this list at $770,600. That?s up nearly 18 percent year-over-year.
No. 3: Boston, Mass.
Break-even horizon: 3.9 years*
Zillow Rental Index: $2,299*
Annual change in Zillow Rent Index: 11.3 percent
With universities and colleges galore, Boston is home to a number of renters. And with a break-even horizon of 3.9 years, it?s rightly so. Last December, the Zillow Rental Index and Home Value Index soared more than 11 percent year-over-year in the Boston real estate market.
No. 2: Seattle, Wash.
Break-even horizon: 4.3 years*
Zillow Rental Index: $1,850*
Annual change in Zillow Rent Index: 4.7 percent
Surrounded by water, Seattle offers extraordinary views for renters and homeowners alike. But prime Seattle waterfront property comes with a hefty price tag, considering the median home value was $392,200 as of December, a 12.6 annual increase. With a break-even horizon of 4.3 years, though, renting may be a better choice for the short run.
No. 1: New York, NY
Break-even horizon: 5 years*
Zillow Rental Index: $2,016*
Annual change in Zillow Rent Index: 19.4 percent
Renters in the Big Apple shouldn?t feel rushed into buying. Unless you plan on staying put for at least five years, it actually makes more financial sense to rent an apartment in the heart of the city. The median home price for New York stayed at $462,500, and the rent index rose to $2,016 as of December 2012. Although nearby Manhattan is a different story, New York proper is a renter's market.
*ZRI and ZHVI median figures show year-over-year percentage change for December 2012. The break-even analysis was done using data through September 2012. Home loss figures are for December 2012.
**It?s not possible to accurately calculate the home-loss figure for Austin due to public-records laws in Texas.
Related:
? 2006-2013 Zillow Inc., All Rights Reserved
Source: http://www.nbcnews.com/business/10-cities-where-its-better-rent-buy-1C8876163
april 18 delonte west vanessa williams nicklas backstrom discovery shuttle allure jane goodall
No comments:
Post a Comment