Breakeven Horizon Stretches as Appreciation Slows

Homes are appreciating at a slower rate—and the time it takes to break even on them is slowing, as well.

The national timeframe for breaking even on a house compared to renting one is roughly two years, three works longer than at the end of 2015, according to the Q4 2016 Zillow Breakeven Horizon. The national breakeven horizon was one year and 11 months in the fourth quarter of 2016, up from one year and 10 months in the fourth quarter of 2015.

Zillow’s latest Breakeven Horizon reveals breaking even has stretched up to two years longer in San Jose and San Francisco, Calif., two of the hottest markets out of the recession in terms of appreciation. In 2015, it took three years and three months to break even on a home purchase in San Jose; in 2016, it took five years and two months. In San Francisco, it took two years and 11 months to break even on a home purchase in 2015—a timeline that lengthened to four years and six months in 2016.

“There are many factors that go into the decision on whether to rent or buy,” says Zillow Chief Economist Dr. Svenja Gudell. “Zillow’s Breakeven Horizon can help people better understand the longer-term financial calculation. It’s also helpful for buyers to understand that as home value appreciation moderates, it will take them longer to break even than in past years. San Jose buyers, for example, will have to stay in a home for at least five years to offset the high upfront costs necessary to make that purchase.”

Homebuyers can break even in a relatively short time span—in the right market. The markets where buyers can break even the fastest, according to the Breakeven Horizon, are: