Dive Brief:
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Renters who purchase homes can recoup the up-front costs of homebuying within two years in most markets, a Zillow study found. That payoff fuels a growing body of evidence that proves it’s cheaper to own than to rent.
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But the Zillow survey, which factored in upfront payments, closing costs, rent versus mortgage payments, insurance, utilities, maintenance, and renovation costs, also showed that 20% of renters simply don’t want to own their homes. Another 53% said they can’t afford to sit at the settlement table.
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Of the renters in the survey, 16% said they can't qualify for a home loan; 18% said they can't afford taxes, maintenance, and other home-related costs that renters don’t have; and 13% said they haven’t saved enough for a down payment. A quarter of them said they can barely pay their rent.
Dive Insight:
The survey offers insight into why more renters aren’t buying homes during a time of historically low interest rates. "If the buy versus rent decision were about simple math, we'd likely have millions more homebuyers in the market, because the equation is tilted heavily in favor of buying," Zillow Chief Economist Stan Humphries said in a press release. “Americans make decisions to buy or rent based on any number of personal dynamics, including preference, flexibility needs, family factors and, yes, financial considerations.”
A separate study by RealtyTrac noted that the monthly mortgage payment on a median-priced home is more affordable than the rent on a three-bedroom apartment in 76% of U.S. markets.
Still, RealtyTrac Vice President Daren Blomquist echoed Humphries’ conclusion: “From a pure affordability standpoint, renters who have saved enough to make a 10% down payment are better off buying in the majority of markets across the country. But factors other than affordability are keeping many renters from becoming buyers.”