Zillow Talk

“Is buying always better than renting? Not necessarily, and the answer lies in your personal circumstances and market conditions.”

1. Determine if buying is better than renting

Buying versus renting depends on financial, personal, and market factors. Tools like Zillow’s break even horizon can help you decide if buying makes sense. This tool compares costs over time, helping calculate when owning would cost less than renting.

The break even horizon incorporates inflation, taxes, and property value changes. If ownership saves money in comparison to renting, it might be the right path. This decision requires assessing your income stability and future plans, particularly how long you plan to stay in the area.

Additionally, owning a home ties up your finances in one asset, unlike renting, which provides flexibility. For some people, this flexibility can outweigh the financial benefits of owning, especially if job mobility or unexpected expenses are a concern.

Examples

• A young professional using the break even horizon finds it cheaper to buy a house after five years rather than rent.
• A family with a steady income decides to buy because they plan to settle down for 15 years.
• Someone expecting frequent job relocations prefers renting to maintain flexibility.

2. Focus on emerging neighborhoods

Your home’s future value depends heavily on its location. While buying in a well-established area might seem appealing, focusing on up-and-coming neighborhoods often yields better long-term returns on your investment.

Emerging neighborhoods often benefit from developments like new malls, better infrastructure, or amenities that bring in demand. For instance, areas with upcoming commercial projects are likely to experience rising property values as people flood into the area seeking proximity to new opportunities.

It's essential to research community trends and planned developments in such neighborhoods. By buying in these locations, you position yourself to ride the wave of growth and appreciation in property values.

Examples

• A buyer moves into a neighborhood where plans for a shopping mall were approved, boosting the area’s attractiveness and home prices.
• Artists and young professionals turn a run-down neighborhood into a vibrant cultural hub, sparking further gentrification.
• Improved public transit links result in a formerly underdeveloped area becoming desirable.

3. Choose the worst house in the hottest area, not the elite area

Purchasing the cheapest house in a wealthy neighborhood might seem wise due to perceived prestige, but it often leads to undervaluing. Buyers might see such properties as problematic due to the mismatch with surrounding homes.

On the other hand, owning the least expensive house in a thriving, developing neighborhood is often more beneficial. Such neighborhoods, ripe with growth potential, can see property values increase quickly as demand rises.

Gentrifying areas usually attract higher-income buyers over time, further fueling property demand. Investing in these neighborhoods allows your home value to grow alongside the area’s development.

Examples

• A run-down but affordable townhouse in an emerging city district gains 20% in value as nearby properties are renovated.
• Buyers avoid the lowest-priced house in a luxury suburb due to fears of hidden flaws or resale difficulty.
• Young professionals reclaim an old industrial area, turning it into a cultural hotspot with skyrocketing housing demand.

4. Homeownership may not suit everyone

Not everyone thrives as a homeowner. Flexibility is key for many, and owning a home ties you down geographically and financially. For individuals with unpredictable life circumstances, this lack of flexibility can create stress.

Programs encouraging low-income families into homeownership, like those during George W. Bush’s presidency, highlight risks. When the housing bubble burst, many faced foreclosure when they couldn’t afford payments, turning their dream into a loss.

Renting becomes valid for those needing mobility or fearing unforeseen expenses. It provides protection from market downturns or sudden relocations, making it ideal for some.

Examples

• A worker whose company frequently relocates opts to rent to avoid dealing with selling homes.
• Families given government-backed mortgages struggle during financial crises, losing their homes.
• Singles prioritize renting for freedom to live in different cities during early career stages.

5. Luxury doesn’t guarantee returns

Investing in high-end renovations might not maximize your home's value. Mid-range upgrades focused on functionality tend to appeal to more buyers and deliver better returns.

Lavish improvements often succumb to diminishing returns. A pragmatic approach ensures the house meets essential needs without overspending. Potential buyers prioritize usability over extravagance.

Moreover, depreciation means luxury items lose value over time. Trends and technological updates often make yesterday’s premium features obsolete today, further limiting their attractiveness and impact.

Examples

• Fixing a leaky sink and replacing old tiles impresses buyers more than installing a jacuzzi.
• A remodeled kitchen with mid-range appliances appeals broadly, unlike costlier top-tier choices.
• A luxury chandelier depreciates quickly as its aesthetic becomes dated in just a few years.

6. Timing can create higher yields

Selling during the right season ensures better outcomes. Spring and summer are ideal due to favorable weather and family schedules, as moving kids outside the academic year is easier.

Homes listed in March often sell faster and at higher prices compared to off-season listings. Early-year preparation maximizes exposure during peak times, leading to quicker and more competitive sales.

Be aware that failing to catch the seasonal wave may lead your property to languish on the market, possibly resulting in it selling below anticipated prices.

Examples

• A house listed in March sells quicker and fetches 2% more compared to October listings.
• Families schedule moves during summer to align with their kids’ school calendars.
• A poorly-timed winter listing struggles as buyers avoid moving during harsh weather.

7. Choose your words wisely when selling

The language used to describe your home makes a difference. Misleading, vague, or overly flowery terms can unintentionally scare buyers away.

Neutral yet specific adjectives resonate better. Words like "modern" or “cosy” can have multiple interpretations, leading potential buyers to misunderstand or avoid the listing.

Detail matters; descriptions that comprehensively outline features generate serious interest. Buyers respond more favorably when they can clearly visualize the property through the description alone.

Examples

• Using “renovated kitchen with quartz counters” attracts attention more than “modern kitchen.”
• Detailed listings with room dimensions and amenity explanations receive more interest than short descriptions.
• Describing a house as “charming” can confuse buyers about its actual condition.

8. Schools boost property values

Even if you don’t have children, proximity to respected schools adds to your home's appeal. Families actively seek areas with good schools, and these neighborhoods often see better appreciation rates over time.

Good schools shape the demand for nearby housing. This demand keeps the property market buoyant even in economic downturns, making it less risky.

Investing in homes within top school districts can ensure that even if market conditions fluctuate, the demand for family homes will remain strong.

Examples

• A couple intentionally buys a house near a well-ranked elementary school, anticipating higher resale value.
• During an economic downturn, homes close to popular schools retain their prices better than others.
• Families compete for properties in districts with added educational resources, driving local home values up.

9. Renting provides flexibility

For those who need financial or geographical flexibility, renting often makes more sense than owning a home. Renting offers greater freedom to adapt to changing life situations without being tied to one place.

Since renting doesn’t require the upfront costs of a down payment, it allows saving for travel, investments, or emergencies. This can be especially beneficial for those early in their careers or individuals still determining long-term plans.

While the appeal of homeownership remains strong, renting allows you to test waters in various locations before making permanent choices.

Examples

• Frequent movers avoid the hassle of buying and selling by renting short-term homes.
• Young professionals prioritize financial liquidity by skipping down payments for recreational spending or investments.
• A renter benefits from job relocation without struggling to sell off property.

Takeaways

1. Use tools like Zillow’s break even horizon to decide whether renting or buying is better for your situation.
2. Always consider the long-term potential of your neighborhood when investing in property.
3. Focus on simple, practical upgrades and time your sales effectively for good returns.