Should I Rent or Buy? Zillow Says Dallas Residents Benefit From Homeownership Quickly

Chart: Zillow

Lots of people wonder if, considering their location and income, if it’s not more financially sound to buy or rent a home in their area. In some cities, renting is the obvious choice (hello, New York!). But what about Dallas?

Zillow combed some facts and figures and came up with data that shows where it makes more financial sense to rent based on what they call the “break even horizon.”

Zillow’s breakeven horizon calculates the point, in years, at which buying a home becomes less expensive than renting the same home. It incorporates all costs associated with buying and renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, insurance, taxes, utilities, maintenance and renovation costs. We also consider the different asset streams available to buyers and renters. For buyers, the home equity grows. Alternatively, renters can invest some of the money they would have spent on a home purchase and earn interest. It then factors in historic and anticipated home value appreciation rates, rental prices and rental appreciation rates.

That is a genius way to break down the cost/benefit of buying vs. renting, because it takes a ton of factors into account. For Dallas, buyers break even when they own a home after 1.4 years and in Houston, it’s 1.5 years. In New York City, it takes 2.7 years for homeowners to break even on costs associated with renting, and in Washington, D.C., homeowners don’t break even until a whopping 4.2 years — the longest wait among the 20 metros Zillow calculated.

Of course, renters deal with other factors besides cost, including need or desire for mobility, low levels of commitment, and financial constraints due to mortgages and lending. Additionally, considering the size of these cities, wouldn’t it make more sense to break it down on a different scale? Maybe Zip Code, or by population density? I know that, for most people, it would make more sense to rent in the Park Cities than buy. Likewise, renting is the predominant option for high-density areas of Dallas such as Uptown. What do you think?