Homebuyers across the United States now face a significantly longer financial timeline before purchasing a home makes more sense than renting, according to a new analysis from real estate technology company Zillow, which found that a median-income household needs nearly 15 years to both save for a down payment and financially break even on homeownership.
According to Zillow, a household setting aside 10% of the median income needs 8.5 years to reach a 20% down payment on a typical single-family home nationally, followed by another 6.2 years before buying becomes more cost-effective than continuing to rent. Combined, that puts the total national breakeven timeline at just under 15 years, a figure Zillow arrived at by measuring two distinct phases: the time required to save for a down payment, and the additional time needed to recover the upfront costs of homeownership relative to renting.
“Buying a home is a financial commitment measured not just in dollars, but in years,” Zillow wrote in its analysis. “Whether to buy or rent is a complex question that depends on where you want to live and your lifestyle preferences, in addition to your financial situation.”
Kara Ng, senior economist at Zillow, said the breakeven timeline offers homebuyers a more complete picture of a housing market than list prices alone can provide. “The common wisdom is that saving early to buy a home is the smart financial move, but the reality is more nuanced,” Ng said. “The breakeven number tells you something about a market that a price tag alone doesn’t.” Ng encouraged prospective buyers to factor that longer horizon directly into their decision-making process. “Buyers should think about not just when they can afford to buy, but how long they’d need to stay before owning makes more financial sense than renting,” she said. “Homeownership comes with equity and stability, while renting offers flexibility and freedom from maintenance bills and emergencies.”
Zillow’s analysis found dramatic variation in breakeven timelines depending on location, driven largely by differences in local rent trends and home price appreciation. In Austin, Texas, a household saving for a down payment reaches the 20% threshold in roughly eight years, faster than the national pace, but then faces an 18-year wait before homeownership becomes financially advantageous compared with renting, a delay Zillow attributed in part to recently declining local rental costs. Miami tells a different story: buyers there spend roughly five additional years saving for a down payment compared with Austin, but reach the breakeven point in about half the time once they do purchase, meaning Miami homebuyers ultimately come out ahead financially roughly three years sooner than their counterparts in Austin.
The report identified purchasing a starter home, defined by Zillow as a property in the bottom third of regional home values, as one of the clearest ways buyers can shorten their overall timeline. On a national level, Zillow found that buying an entry-level home rather than renting a typical apartment cuts the total combined savings-and-breakeven timeline roughly in half, to just 7.2 years.
However, Zillow’s data suggests many buyers remain reluctant to take on properties requiring significant renovation work despite the potential savings such properties often offer. “However, with the cost of homeownership this high, buyers have signaled they do not want an expensive project,” Zillow wrote. According to the company’s research, turnkey homes, those ready for immediate move-in without renovation, sell for 2.9% more than expected, while homes noted as recently remodeled in their listing descriptions sell for 2.2% more than comparable homes without such renovations mentioned. By contrast, fixer-upper homes sell for 14% less than comparable move-in-ready properties. Zillow cautioned that while not every starter home requires renovation, buyers considering a fixer-upper should carefully account for the full cost of ownership, including the likelihood of future repairs.
The current, extended homebuying timeline represents a substantial deterioration compared with conditions before the pandemic. Zillow found that today’s national breakeven timeline runs nearly four years longer than the 11-year wait homebuyers faced back in July 2019, underscoring how significantly affordability has eroded over the intervening years.
Zillow attributed much of the current affordability crisis to a persistent nationwide housing shortage, which the company estimates stands at 4.7 million homes. According to the analysis, metropolitan areas with the largest housing shortages tend to also carry the longest breakeven timelines for prospective buyers. Los Angeles, for example, has the second-largest housing deficit in the country at nearly 345,000 homes, translating into a breakeven timeline of almost 38 years for buyers in that market.
To address the shortage, Zillow has advocated for a range of policy changes aimed at lowering construction costs and encouraging new housing development, including updating local zoning laws to allow for higher-density housing, simplifying municipal permit approval processes, and expanding access to financing options for manufactured homes.
Zillow’s warning arrives as mortgage rates have shown modest signs of easing in recent weeks. Freddie Mac reported Aug. 20 that the average 30-year fixed-rate mortgage stood at 6.65%, down slightly from 6.67% the previous week. “The 30-year fixed-rate mortgage declined this week averaging 6.65%,” said Sam Khater, Freddie Mac’s chief economist, adding that Freddie Mac emphasized borrowers can still save meaningfully by comparison shopping among lenders for the best available rate. Separately, Mortgage News Daily reported a daily 30-year fixed rate of 6.77% as of Aug. 21, with the outlet’s Matthew Graham noting that recent bond market volatility was unrelated to the U.S. Treasury Department’s mid-week announcement regarding its expanded bond buyback program, characterizing the earlier market reaction to that news as having been “overdone.”
With economic data expected to pick up significantly in the coming week, including anticipated remarks from Federal Reserve Chair Kevin Warsh at the central bank’s annual symposium in Jackson Hole, Wyoming, mortgage rates and broader housing affordability trends are likely to remain closely watched by prospective buyers weighing whether current market conditions justify committing to the increasingly lengthy financial timeline Zillow’s analysis has identified as the new reality facing most Americans looking to transition from renting to homeownership.
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