Our rental market is on fire right now. The initial draw is understandable – less hassle involved in moving, less responsibility for the home itself, fewer maintenance expenses, fewer financial barriers to start renting. Particularly for younger individuals, renting seems to be the norm. But things are changing. Unemployment is turning around. College-educated millennials are venturing out of their parents’ basements, starting to turn the tide in the battle against student debt, and looking toward the future.
Even with our aggressive rental market, many are still torn: rent or buy? Renting has the up-front advantages listed above, but the spell begins to break when considering the long-term picture. At some point in any given area, if you live in the same place, the expenses of renting will eventually become greater than if you lived in a home you own. That point is known in the industry as the breakeven horizon. A useful tool, the breakeven horizon factors in things like property taxes, closing costs, renovations, maintenance, and insurance.
In short, the breakeven horizon tells you one thing: when buying a home becomes less expensive than renting. According to this article, the breakeven horizon for Portland is 2 years. Compared to LA’s 5.1 years, Washington D.C.’s 4.2 years, or San Diego’s 3.8 years, buying makes financial sense much sooner here.
The rental market being what it is, widespread increases in rental cost are spurring more people toward buying a property of their own. Naturally, the breakeven horizon isn’t the only consideration when deciding the right time for home ownership, but it’s a great place to start. I would love to answer any questions you might have, and I’m always available to discuss the best real estate strategy for you.