(Please see a summary of the previous chapter in http://www.kataneh.com/index.php/2017/12/01/zillow-talk-chapter-1/)
As opposed to public opinion, renting is not necessarily the right decision for singles or young professionals, and buying is not always right for happy families.
One should think about buying versus renting decision: renting does not require a down payment, and renters do not pay for interest, property taxes or maintenance expenses. However, if you rent, you do not own a house, might have to move out upon landlord’s request, and will not benefit from property price appreciation but are exposed to rent appreciation. Furthermore, you cannot deduct property taxes or mortgage interest from your income. Now, regardless of your family status and solely based on numbers and statistics, if you are planning to live in a neighborhood for one year, renting might be more cost-effective. But if you are staying in the same neighborhood for four years, buying might be wiser. The magic number depends on many factors, including your down payment, the median home price vs rent price,interest rate, property taxes, and the estimated future value of the house vs. rent appreciation. In a neighborhood, you might be better off buying if you are planning to stay for longer than two years, while in another, renting for six years might be the right decision.
Zillow calculates the ‘breakeven’ point based on your information, market information, and median rent vs. purchase price of the neighborhood. For my Canadian friends, MLS does not have a similar calculator. Therefore people usually calculate themselves solely based on average house price divided by annual rent, which is not nearly as accurate.
In my opinion, if your length of stay is longer or shorter than the breakeven point by a safe margin, you may base your decision simply on Zillow guideline. Otherwise, you may need to do your own calculation too. I am not sure whether Zillow includes regular maintenance, and one-time legal and agent fees in its calculation. Also the impact of tax deduction depends on your own family / individual income and tax bracket. So, you may need to consult your accountant for the best judgement.
In sum, it all depends on your own circumstances. But even if you decide to buy because of emotional or cultural reasons when rent is more cost-effective, you’d better make an informed decision, knowing that it is not an economically profitable choice.
PS: see the book on Amazon at https://www.amazon.com/Zillow-Talk-Rules-Real-Estate/dp/1455574740