As DC Area Home Values Rise, Owners Break Even More Quickly

by Nena Perry-Brown

As DC Area Home Values Rise, Owners Break Even More Quickly: Figure 1
A Lanier Heights home that sold last year.

In high-priced metropolitan areas across the country, slowing growth in home values has lengthened the amount of time it takes for a homeowner to break even on their purchase. However, the DC region is bucking that trend.

Compared to a 4.5-year breakeven horizon a year ago, DC-area homeowners who purchased in late 2016 need only own their house for 3.5 years before breaking even, according to Zillow’s newest report. The Breakeven Horizon, as defined by Zillow, is the point at which purchasing a house is more fiscally sensible than renting it. Zillow calculates this measure assuming a 30-year fixed-rate mortgage and 20 percent down payment, while factoring in things like expected rent and home-price growth, mortgage interest rates and purchase price-to-rent ratios.

While the DC region’s breakeven point is still over twice as long as the national median — one year and 11 months — home values in the area are expected to appreciate over the next year, which could lessen the breakeven point further.

“Previously expected to remain flat, home values in and around Washington, D.C. are now expected to grow by 3 percent through the end of 2017,” the report stated. “This renewed vigor in home value appreciation has actually shortened the time it takes to break even in this metro by one full year compared to Q4 2015, to 3.5 years.”

The breakeven horizon varies by sub-market across the region. For example, in DC proper, the breakeven horizon is just over four years. Prince George’s County continues to have the shortest breakeven horizons in the region; in fact, several cities have a lower breakeven point than the nationwide median, with Temple Hills claiming the shortest at 1.25 years.

Higher-priced areas like Great Falls (6.5 years), Bethesda (6 years), Chevy Chase (5.6 years) and Arlington (6.42 years) still have some of the areas longest breakeven points, although these horizons have all dropped since last year.

This article originally published at https://dc.urbanturf.com/articles/blog/3.5_years_dc_area_homeowners_are_breaking_even_more_quickly/12116

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