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