For a typical U.S. household, it can take decades to save for a home and reach the point where buying becomes cheaper than renting, with the timeline stretching into retirement in some expensive markets, according to an Aug. 20 Zillow report.
Zillow calculated the number of years that a household saving 10 percent of the area’s median income would need to save for a 20 percent down payment on either a typical single-family or starter home. The break-even period was when the cumulative cost of owning a home fell below the cost of renting a similar home.
Nationally, Zillow found that after about 15 years, the average household can reach the point where purchasing a home becomes financially advantageous compared with renting for the same amount of time. This includes about 8.5 years of saving for the down payment and another 6.2 years to break even on the purchase.
For starter home purchases, the saving and break-even point is much shorter, at just 7.2 years, compared with renting a multifamily unit.
However, in some high-cost markets, the timeline can be very long. In San Diego, where the median list price was $1.23 million as of July 31, it takes nearly 50 years to reach that point—the longest timeline nationwide.
Other notable markets with lengthy saving and break-even periods include Boston, New York City, and Seattle—all at more than 27 years.
“The common wisdom is that saving early to buy a home is the smart financial move, but the reality is more nuanced,” Zillow senior economist Kara Ng said in the report.
“The breakeven number tells you something about a market that a price tag alone doesn’t. Buyers should think about not just when they can afford to buy, but how long they’d need to stay before owning makes more financial sense than renting.”
Ng added that while homeownership provides equity and stability, renting can offer more flexibility and freedom from unexpected household bills.
On Aug. 18, Zillow reported that the typical asking rent increased to $1,962 nationally in July—a 2.3 percent annual jump and the fastest pace in more than a year. Based on that rent, Zillow said a household would need an annual income of $78,488 to afford it, compared with nearly $100,000 to afford a typical mortgage payment.
In Memphis, Tennessee, which had a median list price of $168,423 as of the end of July, the timeline shrank to 11 years, the shortest in the country.
The report also shows that the number of years required to save a down payment in Austin, Texas, skewed lower than the national average, at just eight years. At the end of July, the median list price there was $563,250. However, it notes that due to declining rents, that same buyer would need another 18 years to break even on the purchase compared with renting, surpassing the national average by more than three times.
Miami, meanwhile, presented a contrasting case: Buyers needed about 13 years to save for a down payment but could break even with renting in just 9.6 years. Miami’s median list price stood at $646,600 as of July 31.
Zillow noted that in 2019, the combined timeline was 11 years nationwide—about four years shorter than today. It said the housing shortage of some 4.7 million homes was contributing to rising costs and longer timelines for both saving and breaking even.
“The metros with the largest shortages tend to also have the longest break-even timeline,” the report says.
