As rents continue to rise and home prices continue to decline, the advantages of renting over owning are becoming ever narrower in many major metropolitan areas.
According to the latest data from Zillow, nearly 75 percent of the 200 metro areas it surveyed would see homeowners reach a “break-even point” in three years or less. The break-even point essentially refers to the amount of time a homeowner would need to live in a new home before the cost of owning becomes less than the cost of renting.
Despite these findings, the consensus seems to be that people are still scared to enter into homeownership due to the fragile economy. And financing for a home purchase is certainly tougher to come by these days. But that doesn’t mean homeownership isn’t gradually becoming a more viable financial option for the latest generation of renters.
For apartment owners, the narrowing gap indicates a delicate balancing act. Demand is so high, and supply so low, in many areas that rent growth is a given. The temptation is to push rents as much as possible, to make up for a few lost years during the recession. But at some point, if you’re too aggressive, you may push renters right into the homeownership column.