Should you buy or rent a place to live?
Deciding whether to buy or rent depends on several factors. Among them: where you live, how long you plan to stay in your home and how home prices compare to rents in the area.
Zillow crunched the numbers for CNNMoney to figure out how long a new homebuyer would have to own their home before it would make better financial sense to buy. It’s at this “breakeven horizon” that total rental costs would exceed the total cost of home ownership.
In three-quarters of the U.S., that horizon is three years or less, according to Zillow’s chief economist, Stan Humphries.
To make these calculations, Zillow accounted for the costs associated with buying a home, including the down payment and transaction costs (such as commissions and fees), mortgage payments, property taxes, maintenance costs and tax deductions, among other things. It then compared that with rental costs, including monthly payments and commissions and adjusted the numbers for inflation and forecasted home value and rental price increases.
Here’s how the nation’s 10 biggest cities fared.
1. New York City – Rent
2. Los Angeles – Rent
3. Chicago – Buy
4. Dallas – Buy
5. Philadelphia – Buy
6. Washington, D.C. – Buy
7. Miami – Buy
Foreclosures have plagued the south Atlanta area recently. The metro area saw increases in foreclosure activity during each of the first half of this year.
Now pockets of the market have short sales and bank-owned properties aplenty — creating bargains. The median home price in Atlanta has fallen to well below $180,000, which, combined with low mortgage rates, has made buying a great deal in most intown communities.
But, as in most cities, it all depends on where you buy. In a depressed town like Jonesboro, where incomes is about 50% lower than the state average, you could breakeven in just over a year. But if you opt to purchase in the established Druid Hills area, it could take closer to seven and a half years.
9. Boston – Rent
10. San Francisco – Rent
To see the details for each metro area, click here to view the CNNMoney slideshow.