Is it better to buy a home or rent? An analysis released today by real estate information provider Zillow.com finds that in most of the U.S., buying becomes a better deal than renting after only three years of residence.
In many metro areas, the advantage comes much sooner.
In Miami, Fort Lauderdale, and Tampa, for example, owning beats renting after 1.6 years, the study finds. Zillow determined the breakeven horizon—the point at which owning becomes more financially advantageous than renting the same home--for more than 200 metro areas and 7,500 cities around the U.S.
Unlike a simple purchase price-to-rent ratio, the breakeven horizon takes into account such other data as taxes, tax deductions, down payments, utilities, appreciation, maintenance, opportunity costs, and fluctuations in the rental market.
"People traditionally have looked at the price-to-rent ratio," Zillow senior economist Svenja Gudell tells ABC News. "But that's not comparing apples and apples. Our calculation takes into account all costs, plus tax deductions and inflation. It would be very hard for the average consumer to crunch these numbers."