Friday, August 24 2012
For everyone who rents (or leases) Evansville rental homes, it’s a choice that comes up every year: rent or buy. In addition to the common sense considerations everyone brings to that important decision, some financial measurements have been developed through the years that attempt to bring an element of rationality to a largely subjective decision.
Actually penciling out an answer isn’t always satisfactory because it is literally impossible to quantify elements like peace of mind. To some who own their homes, there is great peace of mind in controlling their own destiny. To others, the worry of being responsible for a home’s maintenance or taxes makes the ‘peace of mind’ factor a wash -- or even a negative.
Likewise, those who lease rental homes may find the lack of responsibility liberating…or the lack of control bothersome. It’s a personal preference. What makes it even less subject to mathematical measurement is that anyone’s preference is likely to change due to life and career factors. (Just try to measure that, bean counters!)
All this is to introduce a new one of those metrics just introduced by Zillow this month. The metric, which is a pretty clever one, was introduced in an online article by Zillow’s Nalina Varanasi. Her all-but-hilarious introduction describes traditional methods used to try to quantify the rental homes vs. owned homes financial tradeoffs. The unintentional amusement arises from the 850 words and seven paragraphs it takes to describe just two of them. The mind-numbingly complex ratios-divided-by-more-ratios explanations are invariably followed by phrases like, ‘but the main problem with this’ or ‘still, this doesn’t account for…’
Zillow’s new measurement is also exceedingly complex, but yields one simple number. They call it the ‘Breakeven Horizon.’ It's the number of years after which buying becomes more financially rewarding than renting. (At the exact number, it wouldn’t make a difference one way or the other). Since the Breakeven Horizon can’t take into account the very real personal value judgments, it’s as flawed as all the others. But it does yield an interesting nugget: in general, as a nation-wide average, it has been moving downward. Right now, the break-even point for most homes in the U.S. is around three years. In places like Miami-Fort Lauderdale, the break-even period comes in a scant 1.6 years.
Still, I have to admire author Varanasi’s boldly self-aware skill in her choice of headlines. Her announcement of the new Price Horizon metric is titled,
“Should You Buy or Rent? Depends on How Long You Want to Stay and Where You Want to Live (Of Course)”.
By the way, whenever you want to buy or rent, if it happens to be anywhere around Evansville, don’t hesitate to give me a call! We’ll find you the home that fits your needs (Of Course)! You can reach me on my cell phone at 812-499-9234. Comments:
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