Homeowners are waiting longer to see their purchase break even as home value appreciation slows down from its rapid growth, according to the Q4 2016 Zillow Breakeven Horizon.

Across the nation, the time it takes to break even on a home increased one month from one year and 10 months in the fourth quarter 2015 to one year and 11 months in 2016, but some markets were much more pronounced.

When home values grow quickly, home equity also accumulates faster, helping to offset and eventually recoup the large upfront costs of buying a home more quickly. Some metros, especially those in the San Francisco Bar Area, saw a slow-down in home value growth this year.

Many metros in California are among those that saw the most slow-down in from 2015. Not only did they see the most slow-down, but metros such as Los Angeles-Long Beach-Anaheim, California, San Francisco, San Diego, and San Jose all have times over four years to break even.

However, some metros broke the slow-down trend and saw significant decreases in time to break even. The District of Columbia sped up by 11 months to a break-even time of three years and six months. New York and Northern New Jersey also sped up, decreasing its break-even time by eight months to two years and six months.

The fastest market was Indianapolis, where homebuyers break even after one year and four months. This is followed by Orlando, Florida; Tampa, Florida; Detroit and Atlanta, which all take only one year and five months to recoup the costs from buying. Unsurprisingly, Dallas follows closely, taking only one year and six months to break even.  

U.S. home growth accelerated at the end of 2016, ending the year at 6.8% annual appreciation rate. During that same period, rent appreciation slowed significantly to a growth of 1.5% annually.

“There are many factors that go into the decision on whether to rent or buy,” Zillow Chief Economist Svenja Gudell said. “Zillow’s Breakeven Horizon can help people better understand the longer-term financial calculation.”

“It’s also helpful for buyers to understand that as home value appreciation moderates, it will take them longer to break even than in past years,” Gudell said. “San Jose buyers, for example, will have to stay in a home for at least five years to offset the high upfront costs necessary to make that purchase.”

Here are the top nine metros that saw the most slow down in time to break even after buying a home:

9. Cleveland – Increased four months

Time to break even in 2015: 1 year, 6 months

Time to break even in 2016: 1 year, 10 months

Cleveland

8. Riverside, California – Increased four months

Time to break even in 2015: 1 year, 10 months

Time to break even in 2016: 2 years, 2 months

California

7. Sacramento, California – Increased four months

Time to break even in 2015: 2 years, 1 month

Time to break even in 2016: 2 years, 5 months

California

6. Denver – Increased six months

Time to break even in 2015: 1 year, 9 months

Time to break even in 2016: 2 years, 3 months

Colorado

5. Austin, Texas – Increased six months

Time to break even in 2015: 1 year, 11 months

Time to break even in 2016: 2 years, 5 months

AustinSkylineWaterPhoto.jpg

4. Seattle – Increased six months

Time to break even in 2015: 1 year, 11 months

Time to break even in 2016: 2 years, 5 months

Washington

3. San Diego – Increased eight months

Time to break even in 2015: 3 years, 5 months

Time to break even in 2016: 4 years, 1 month

California

2. San Francisco – Increased 1 year, 7 months

Time to break even in 2015: 2 years, 11 months

Time to break even in 2016: 4 years, 6 months

California

1. San Jose, California – Increased 1 year, 11 months

Time to break even in 2015: 3 years, 3 months

Time to break even in 2016: 5 years, 2 months

San Jose