NEW YORK (TheStreet) -- Though millions of homeowners are effectively stuck in their homes because they owe more than the properties are worth, prospective homeowners face a much more pleasing condition: In half of U.S. metropolitan areas, buying now beats renting after a mere two years.
"Rents keep rising, and mortgage interest rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it," said Stan Humphries, chief economist for Zillow.com, the housing and mortgage firm behind a rent-versus-own study.
Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas.
Two years is a surprisingly short time to make a home purchase pay off. For many years, the rule of thumb was that you must own a home for four or five years to break even. It takes that long for the home's rising value to offset the various costs, including title insurance and realtor's commission, incurred in the purchase and sale. Renting makes more sense for anyone who does not expect to stay in the home beyond the break-even period.
After the housing crunch several years ago, tens of millions of homeowners found that falling home values had left them with properties worth far less than they owed their mortgage lender. Even after several years of solid price gains, the typical home is worth about 15% less today than at its peak about eight years ago. That extended the break-even period for many homeowners to many, many years.