USELESS INFORMATION FROM ZILLOW
Interesting maybe, but pretty much useless information from Zillow (reported by Inman News, Amy Swinderman, July 9, 2015): Zillow has developed a “Breakeven Horizon” analysis that shows “…when it comes to the real estate market, location isn't everything; so is timing.” They have data and a nice chart that they say shows how long it takes a home buyer to be better off financially than if they had continued to rent.
The chart compares first quarter 2015 with 4th quarter 2014, giving the national average and values for a list of major metropolitan markets in the US. For example, the figures for Q1 2015 show that the national average to the breakeven point is 1.9 years, ranging from a low of 1.1 years in the Dallas-Ft Worth area to 4.5 years in Washington, DC.
OK, so what does it mean? Suppose you are a renter in New York and you check out this “analysis” and see the big difference between where you are and DFW… so what do you do, start packing to move to the DFW area and buy there because it’s “better financially”? Ummmm….. no, I don’t think so. Or maybe you look at the comparison between quarterly figures and see that it got “worse” in New York, but improved a bunch in Denver, so you would pack and move to Denver to take advantage of the trending statistics, right? Yep, sure you would.
Like I said, I consider it to be pretty much useless information, other than maybe having some curiosity value –would YOU pick where to live because of these breakeven figures? If you are a renter, is it likely that you would decide where to buy a home because of how long it may or may not take to break even? Or would you make a decision to buy or keep renting because of Zillow’s “timing” information?
Oh yeah, another not-so-valuable part of their wisdom, they compared today’s market with 2009, before the housing market nosedive hit rock bottom, to show you how much it hurt. Say what? How’s your crystal ball – all warmed up and ready to show the future?
One more thing, I don’t believe potential return on investment is really the most important factor to consider when buying any primary residence anywhere. What you should be looking at is the improvement in quality of life, family environment, employment, schools, how long you expect to stay in the home and more. There is a complicated set of factors to consider and the advantages of owning vs renting are different for everyone, so you need to be sure to consider your personal situation and long-term goals before making your decision.
Let me know what you think. Am I missing something?
PS: To be fair, they did sort of redeem themselves with this statement:
“When it comes to the impact of timing on the decision to buy a home and start realizing financial benefit, some people may not have the luxury of waiting, say, two more years, because the market may be totally different in two years — and there is no way to predict the future past a certain point…”