How long do you need to live in Boston for it to make financial sense to buy a home?
The amount of time it takes to break even has gotten shorter in the past year.
If you plan on staying in your home in Boston for more than three years, you should seriously consider buying instead of renting, according to a new Zillow report.
Zillow calls this time limit – the point at which homeowners start to save money compared to renters – the “Breakeven Horizon,’’ and it has been getting shorter in Boston.
In the last quarter of 2014, the amount of time you needed to stay put to “break even’’ on a home in Boston was 3.4 years, and by the last quarter of 2015, that number had decreased to 3.1 years.
Boston’s rising rent prices over the past year could have contributed to this decrease.
Zillow determines this number by comparing the cost of owning and renting a home at the end of each year for 30 years, taking into account factors like the inflation rate, property taxes, home and rental appreciation rates, and opportunity costs.
Boston has a higher breakeven point than the national average, which is currently 1.9 years.
Zillow notes that people under age 35 stay at the same job for only three years on average – meaning that renting in Boston might still be the best option for millennials.
Chief Economist at Zillow, Svenja Gudell, said in a statement, “Even with record-high rents in job centers like San Jose, Boston and Washington D.C., putting off a home purchase might be the best financial decision for a young person who has saved enough for a down payment, depending on how long they intend to stay in their jobs and homes.’’
Of course, all of this calculation is only necessary if you can manage to save up enough cash for a decent down payment, a hurdle for many Bostonians.
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