Breaking Even

In Austin, it might be cheaper to rent a home than to buy

In Austin, it might be cheaper to rent a home than to buy

1613 Nash Ave Austin house for sale
Building equity in Austin is not easy. Photo courtesy of Kuper Sotheby's International Realty

Even though it's getting more and more expensive to live here, prospective Austin homeowners are still itching to buy, buy, buy. Considering how much of your salary you might have to put aside for a down payment, is buying still a better financial decision than renting?

Yes, says Zillow, but maybe not in Austin. The real estate website released its final Breakeven Horizon Report for 2016, and the results show that the amount of time it takes for an Austin home purchase to be worth more than renting the same property — and to recoup the hard costs associated with buying the home — is two years and five months.

That's half a year longer than at the end of 2015, when the number was one year and eleven months, and the fifth biggest increase among the cities in Zillow's study. Seattle's upward trajectory mirrors ours exactly, while fellow breakeven twin Philadelphia is actually enjoying a decrease in wait time.

The current Breakeven Horizon point for the nation is, coincidentally, one year and eleven months. Some of the factors that go into Zillow's calculations are expected growth in rents and home values, price-to-rent ratios, and mortgage interest rates.

At one year and four month, Indianapolis is the No. 1 city for breaking even. Atlanta, Detroit, Tampa, and Orlando (all one year and five months) share the No. 2 spot with a four-way tie.

In Texas, Dallas-Fort Worth has by far the quickest breakeven point. San Antonio homeowners have to wait one year and nine months, while Houston is right in line with the country as a whole at one month shy of two years.

The fourth-quarter report also shows that a general slowdown in home appreciation values across the country is most greatly impacting the most expensive (and often coastal) cities. In San Jose, for example, it takes a homeowner more than five years to reach that breakeven point, while Los Angeles and San Francisco buyers are stuck waiting more than four years before they can begin building equity.

But not everyone is seeing this slowdown. New Yorkers and Washington metro residents have a significantly shorter breakeven point this year when compared to last, meaning that home value appreciation is still soaring in a few markets and up 6.8 percent nationally.