PHOENIX -- Buy vs. rent? It's a tough question when it comes to new homes. But a Zillow report released Wednesday indicates in which cities you should consider buying a home, and in which cities you might be better off renting.
Zillow offers a tool called the "breakeven horizon." The breakeven horizon is the number of years after which buying is more financially advantageous than renting.
When living in a home for a shorter period of time than the breakeven horizon, renting is more advantageous than buying. Zillow computes this number at the home level and then calculates the average and median breakeven horizons at the city and metro levels.
Zillow’s breakeven horizon is computed at the home level and incorporates all possible costs and benefits associated with buying and owning a home, such as the down payment, purchase costs, mortgage payments, property taxes, utilities, maintenance costs, tax benefits etc., as well as all the costs associated with renting the same home. It also includes expected home value and rental price appreciation.
For Phoenix, buying is a better decision if you plan to live in the home for at least three and a half years. Most cities on the list have a breakeven range of less than three years.
In Arizona, here are the top cities for buying:
Top cities for renting:
The cities in which buyers have the quickest breakeven time are Riverside, California, and Orlando and Tampa in Florida.
It will take you the longest to break even in Washington, D.C. (more than four years), followed by Boston and then Phoenix.