Report Says Buyers Can Break Even on a Home Purchase in Less Than Two Years

The real estate market has shown that timing matters when purchasing a home. Zillow's Breakeven Horizon analysis determined that homebuyers who made the biggest financial gains over the last decade entered the market at its lowest point. The analysis found that homeowners can still break even on a home purchase in less than two years, even while many buyers who bought 10 years ago have not broke even.

The analysis reviewed how buyers can expect the market to perform and how buyers fared at different points in the housing crisis and recovery. Many buyers lost money in the housing market simply by buying before the market had bottomed out.

"For example, millions of buyers took advantage of the federal homebuyer tax credit in 2009 and bought a home before the market had fully bottomed out," the Zillow report said. "In most of the country's 35 largest housing markets, those buyers would have been better off financially if they had rented and put their money anywhere else – stocks, bonds, or even in their bank account. On the other hand, buyers who bought in 2012 fared much better and made more in the housing market than they would have even if they had rented and invested their savings in the recently bullish stock market instead."

According to Zillow, the wide variety of outcomes is a result of the U.S. economy's boom, bust, and recovery over the past decade. The first time homebuyer tax credit was part of a government effort to push economic recovery as the country exited the Great Recession, but it came before the market had fully hit bottom. Buyers looking to purchase in the country's hardest hit housing markets found the greatest opportunities if they bought at the right moment.

The breakeven horizon for the U.S. remained flat from the previous quarter in the first quarter of 2015, Zillow says. This was mostly due to rising rents, which made it advantageous to buy rather than rent. Currently, homebuyers can break even on a home purchase in two years or less in 23 of the top 35 housing markets and the national average is 1.9 years. Dallas-Fort Worth buyers can break even the fastest, in 1.1 years. Breaking even takes the longest in Washington D.C. at 4.5 years and Los Angeles at 4.3 years.

"It's very clear that when it comes to maximizing gains from an investment in real estate, timing really does matter a great deal," said Dr. Stan Humphries, Zillow's chief economist. "However, timing isn't everything, and trying to time the market perfectly is incredibly difficult, even for professionals. There are any number of factors to consider when purchasing a home, only one of which is the potential for financial gain. Potential buyers should always place their personal needs and their family's needs first, and make the decision to buy only when they are ready to make a significant investment of both their time and money. Just because the math might say to buy or rent in a given area, personal preferences and situations vary greatly, and there is no one answer that is right for everybody."

Click here to view Zillow's Breakeven Horizon report.