For those torn between buying and renting, the breakeven point—the time at which an investment becomes financially advantageous—can help determine which route to take. The breakeven horizon, according to Zillow, stands at 1.9 years, meaning that in the majority of markets (70 percent), homebuyers will break even on a home purchase in less than two years. Contributing to that horizon is the pace of rent, low interest rates and a healthy home value forecast.
The breakeven horizon for some of the nation’s most popular job markets, however, is between 2-3 years. Because many under age 35 tend to stay employed at the same place an average of three years, it may be more prudent for them to rent, even if a mortgage would be more affordable. Condominiums—a common choice for young homebuyers in urban neighborhoods—have a longer breakeven horizon due to association fees.
‘Even with record-high rents in job centers like San Jose, Boston and Washington, D.C., putting off a home purchase might be the best financial decision for a young person who has saved enough for a down payment, depending on how long they intend to stay in their jobs and homes,’ says Zillow Chief Economist Svenja Gudell. ‘Young workers face a lot of hurdles on the way to homeownership, including saving for a down payment in the first place and deciding where and when to settle down. The latest Breakeven Horizon gives young people another data point to consider when they’re making this important financial decision.’
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