- Early 2000 buyers broke even (relative to renting) very quickly by building wealth in housing and avoiding the stock market during the early 2000s.
- 2005 buyers broke even twice, yet now have large ownership deficits.
- Many buyers who accepted the home buyer tax credits in 2009 would have been better off financially by renting and putting their savings into the S&P 500 instead.
- Many who bought during the home value trough (2012) now enjoy large ownership surpluses.
The decision whether to buy a home is difficult. It’s not just the many costs to consider – transaction costs, maintenance, property taxes and homeowners insurance, for starters – but also how those costs might be offset by tax benefits and growing equity. And there’s always alternatives to consider, too: How high are rents? If you’re not using your money as a down payment, what are you doing with it? If you were to invest that money instead, what would that do for your wealth relative to home equity growth?
These factors and more are baked into Zillow’s Breakeven Horizon, which is the length of time you’ll need to live in a property for it to have been more financially advantageous to buy it instead of renting it and investing elsewhere. After breaking even, you’ll begin saving relative to renting, earning what we call an “ownership surplus” (see below for a more detailed definition).
Balance of details here on Zillow: