As both home values and rents rise, how long the DC region’s homeowners need to stay in their homes in order to break even has dropped again.
Zillow's latest breakeven horizon report, which delves into how long it takes for home purchasing costs to pay for themselves versus having spent the same amount of time renting, shows that DC area homeowners will break even in the shortest timeframe seen in recent years.
As of the first quarter of 2018, the median breakeven horizon for the region came in at 2.96 years. This is a 1.74 year drop compared to the last quarter of 2017.
Despite being a surprisingly reasonable amount of time compared to previous quarters, the DC region's breakeven horizon is actually the sixth-longest natiwonwide, but shorter than Los Angeles/Long Beach (3.7 years) and San Francisco (2.98 years); Portland, Oregon (3.07 years); Hartford, Connecticut (3.23 years); and Virginia Beach (3.11 years).
The breakeven point is measured with a one-to-one comparison of the costs of purchasing vs. renting a random sample of 3,000 units in each zip code. The purchase price and rental rate of each dwelling is determined using the controversial Zestimate tool.
A home purchase assumes a 20 percent down payment; a 30-year fixed-rate mortgage at the current interest rate; ancillary costs like homeowner’s insurance, property taxes, 3 percent closing costs, and, where applicable, either 1.2 percent in annual condo fees or 1 percent of home value in annual maintenance costs; tax deductions; and predicted home price appreciation. Rental costs assume one month’s security deposit and renter’s insurance, while assuming that not having to pay home-associated expenses affords the renter a 5 percent annual accrual on the foregone down payment.
This article originally published at http://dc.urbanturf.com/articles/blog/2.96-years-the-breakeven-horizon-for-dc-area-homeowners-gets-shorter/14006
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