Breaking even is taking longer than it used to. In its latest look at what it called the “breakeven horizon,” Zillow found that it now takes almost exactly two years, on average, to live in a home before buying it makes more financial sense than renting it.
That’s three weeks longer than it took in 2015, an offshoot of a year of rising property values all over the U.S. Accelerating home prices in many markets last year often offset owners’ ability to recoup larger upfront purchase prices and down payments.
“Overall, U.S. home value growth accelerated at the end of 2016, ending the year at a 6.8 percent annual appreciation rate, Zillow reported. “At the same time, rent appreciation slowed significantly, only growing at 1.5 percent annually.”
At the end of Q4 2015, it took the average U.S. homeowner a year and 11 months to reach the breakeven point. As of Q4 2016, that timeframe was a year, 11 months, and 20 days.
In more expensive areas like Silicon Valley and the Bay Area, the wait time is even longer. According to Zillow, the breakeven horizon in San Jose is almost two years longer than it was at the end of 2015. In San Francisco it is a year-and-a-half longer. Both translate to about a four-year wait time to break even. The same holds true for Los Angeles and San Diego.
On the other side of the coin (and the country), Washington, D.C., is seeing its home prices accelerate more slowly of late. Zillow expects the D.C. metro area to remain largely flat in terms of home price value over the next year, meaning less time to reach the breakeven point. Currently, the breakeven horizon in the capital metro is about 3.5 years.
Buyers will break even fastest in the South and Midwest, Zillow reported. In Indianapolis, Orlando, Detroit, Atlanta, and Tampa, it takes less than 1.5 years to break even on a home.