Aug
05

Owning Chicago Real Estate Still Worth It

August 05, 2012

The housing industry has gone through the ringer the past several years, but a new report shows that buying Chicago real estate is still a better financial move than renting.

Ownership of Chicago real estate edging up over rentingThe website Zillow analyzed the “breakeven horizon” in more than 200 metropolitan areas to determine how many years it would take before owning a home becomes more financially advantageous than renting the same home.

In more than 75 percent of the metro areas analyzed, it would take a homeowner three years or less before home-buying costs drop lower than rental expenses.

And that includes Chicago. According to Zillow, Chicago real estate owners need only 2.8 years, or about 34 months, to break even.

The analysis considered all possible costs associated with buying and renting a home, including down payment, mortgage and rental payments, transaction costs, property taxes, utilities, maintenance costs, tax deductions and opportunity costs. The numbers were even adjusted for inflation, including home-value and rental-price appreciation.

The metro areas where it takes more than five years to reach the breakeven point accounted for 7 percent of the 224 metros covered by the report and include:

1. San Jose, Calif.: 8.3 years

2. Oak Harbor, Wash.: 7.2 years

3. Santa Cruz, Calif.: 7.1 years

4. San Luis Obispo, Calif.: 6.3 years

5. Salinas, Calif.: 6.3 years

Some of the metro areas with the shortest breakeven horizons are areas in which home values fell the most during the housing recession, including the Miami-Ft. Lauderdale area, which registered an average breakeven horizon of 1.6 years, as did Memphis, Tenn., Salisbury, Md., Red Bluff, Calif., Mobile, Ala., Tampa, Fla. and Fernley, Nev.

“Across most of the country, historic levels of affordability make buying a home a better decision than ever, especially considering rents have risen more than 5 percent over the past year,” said Stan Humphries, Zillow Chief Economist.

“This is the first analysis of metros and cities that presents the buy versus rent decision in an intuitive way, by telling consumers how long they must live in the home before buying breaks even with renting financially. It’s much more understandable, and therefore useful, than the abstract notion of a simple ratio of prices to rents. If we want consumers to act on market information, we have to align it with how they think about the issue and make it straight-forward to grasp.”

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