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Zillow: If You Plan On Staying in DC For At Least 3.5 Years, Buy a Home

by Shilpi Paul

Zillow: If You Plan On Staying in DC For At Least 3.5 Years, Buy a Home: Figure 1

According to research from real estate website Zillow, if residents in DC and the surrounding areas are planning on living in a home for more than 3.5 years, buying makes more financial sense than renting.

In an attempt to create a better rent vs. buy index than what is currently out there, Zillow created a “Breakeven Horizon”, or how long it takes for owning to become financially advantageous over renting, for markets across the U.S. While typical wisdom recommends staying in a recently-purchased home for at least five years to overcome transaction costs, Zillow said that the market conditions in each individual city may lower or raise this number.

In the DC metro area, Zillow determined that, on average, home owners can reach the break-even point in 3.5 years. However, the total number of years varies based on the city. In suburbs like Chevy Chase Village and McLean, it will take more than 7 years to break even. Potomac, Bethesda and Arlington are at about 5 years, and DC is at 4.5 years. Several cities in Maryland have break-even points under two years, with those in Prince George’s County taking the very lowest spots.

Zillow determined their breakeven horizon by taking into consideration a host of factors, like price and rent projections for each city, maintenance costs, transaction costs and tax deductability.

While most of the country’s housing markets seem to favor buying, some cities in California have astronomical break-even points that approach 30 years. You can check out Zillow’s data here.

See other articles related to: zillow, rent vs buy

This article originally published at https://dc.urbanturf.com/articles/blog/rent_or_buy_if_you_plan_on_staying_at_least_3.5_years_buy/5859

4 Comments

  1. JP said at 8:05 pm on Thursday August 2, 2012:
    This is exactly what we determined by doing our own analysis back January before buying in the District. We assumed that both rental rates and home values will stabilize in the city as a number of huge projects come online through 2014. Looking past 2015 is probably going to be the next leg up as all prime real estate surrounding downtown will be build out. A 4.5 year break even point for the District isn't great, but looking 7 years down the road is when things may turn dramatically in price appreciation
  1. Holly Worthington said at 9:38 pm on Thursday August 2, 2012:
    Thanks for this really good article. What this article doesn't say is that everyone has to live somewhere and the longer you own, the more financially stable you are likely to become because your housing costs are largely fixed for thirty years. Rent prices increase generally speaking over the long haul. Regardless of the equity you are or aren't building in a home over the short term, fixing your housing costs long term is a money maker.
  1. CE said at 1:52 pm on Thursday September 13, 2012:
    In the first paragraph, you state that the breakeven point is 3.5 years. In the 3rd paragraph, it's changed to 4.5 years. Is it just a typo or am I missing something?
  1. Shilpi said at 2:42 pm on Thursday September 13, 2012:
    Hi CE, 3.5 years is the breakeven point for the DC metro area, which includes counties in Maryland and Virginia. In DC proper, it is 4.5 years. Hope that clears it up! Shilpi

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