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No surprise here: Zillow reports it's better to buy a home in Dallas
It’s a classic real estate conundrum: rent or buy? Certainly in Dallas, where real estate remains affordable, it’s easier to realize the dream of owning a home, especially compared to other major metropolitan areas. And, despite the real estate crisis in recent years, prices here have remained relatively steady.
Even so, leasing remains an attractive option for people in Dallas, either because it requires a smaller outlay of cash or because upkeep and maintenance falls on the shoulders of the owner. In fact, home rentals have become harder to come by, and those that do become available often get snatched up within days.
Recently CNN Money published a report by Zillow about whether it made more financial sense to rent or buy in the nation’s top 10 cities. Zillow identified a “breakeven horizon” that established how long a new homebuyer would have to own his or her home before it would make more sense to buy – essentially the point at which total rental costs would exceed the total cost of ownership.
No mention of the Park Cities, but the breakeven time in neighborhoods like Highland Park are likely more in line with that of Westover Hills.
CNN Money reports that horizon is three years or less in three-quarters of the United States, according to Stan Humphries, Zillow’s chief economist. In cities like New York and San Francisco, it can take five years or more because home costs are so high – which is why renting is the way to go.
Zillow looked at factors such as down payment and transaction costs, mortgage payments, property taxes, maintenance costs, and tax deductions, then compared that to rental costs (monthly payments plus commissions). Zillow adjusted the numbers for inflation and forecasted home values and increases in rental prices.
Not surprisingly, the number-crunchers at Zillow say it’s wiser to buy in Dallas-Fort Worth, where the company reports the median home price is $163,100 and median rent is $1,030, thereby making the breakeven time 2.1 years.
Texas’ largest metro area is blessed with plenty of open land to build on and a local government policy that's friendly to development, which has helped keep housing here extremely affordable.
The median home price in the Dallas metro area is 20 percent below that of the nation and, as a result, it takes only a couple years of ownership for buyers to break even on their investments, according to Zillow. Meanwhile, demand from a steady flow of new residents has pushed rents slightly higher than the average city.”
Naturally the breakeven point can vary wildly within these metropolitan areas; the report goes on to state that Fort Worth’s Westover Hills has some of the most expensive home prices compared to rental costs, and the breakeven there is a whopping 11 years.
No mention of the Park Cities, and, as Candy Evans rightfully pointed out on CandysDirt.com, the breakeven time in neighborhoods like Highland Park are likely more in line with that of Westover Hills.
Also not shocking: It makes better financial sense to rent in New York, San Francisco and LA. More interesting: It’s better to buy in Chicago and Washington, D.C., where the breakeven times are 2.8 and 3.5 years, respectively.