Buy or Rent in Florida’s Biggest Metros?
Many first-time homebuyers and millennials are eager to buy a home and benefit from long-term investments. But, the biggest benefit to home ownership facing buyers today is lesser costs. According to Trulia, buying a home with at least 20 percent down is 37.7percent less expensive than renting, making home ownership both financially smart and emotionally gratifying.
Home buyers fare remarkably better than renters in South U.S. markets, but the collective winner is clear. Even for Honolulu real estate, a metro that shows the slimmest financial advantage to buying, the cost difference comes out to 17.4 percent less in favor of home ownership.
Although you’ll find a better deal when buying in most cities, some have a bigger spread than others. Florida, specifically, holds three out of the top five locales where buying beats renting the most. If you’re seeking real estate in the Sunshine State, consider these top markets where buying can make a world of a difference to your wallet size. And seeking help from the professionals at Premier Sotheby’s International Realty will better your chances of finding the best deals in the South Florida market.
Miami
In Miami, the median home value is $259,527 while the median rent is $2,000 per month. Using these figures, the cost of buying a home in Miami is currently 53.2 percent closing and live in their residence for at least seven years. For buying to become less advantageous than renting, Miami homes would have to rise 127 percent in price to a median $589,127. Rates pose a lesser threat, needing a wide 252.2 percent jump to an average 12.9 percent loan.
West Palm Beach
Prospective buyers in West Palm Beach tie with Miamians for the best buying deal. At a median home value of $241,509 and a median rent of $1,950, buying in West Palm Beach is 53.2 percent less expensive than renting. In order for buying to become more expensive than renting, home prices in West Palm Beach must rise 128 percent to $550,641, while rates would need to jump a staggering 263.4 percent to an average 13.3 percent loan.
Fort Lauderdale
Ft. Lauderdale’s rent vs. buy is -52.9 percent, pegging buying as the better deal by a long shot. The median home price in Fort Lauderdale is $217,342 while the median rent is $1,800 per month. In order for a major shift to occur to make renting the better deal,home prices would have to jump 127 percent to a median $493,367. Meanwhile, rates would need to increase 268.9 percent to 13.5 percent – a more implausible circumstance.
Tampa-St. Petersburg
While not one of the top 10 better buying markets nationally, the Tampa-St Petersburg metro has a clear promising residency choice. At a median $172,392 home value and median rent of $1,350 per month, buying Tampa-St. Petersburg homes is 50 percent cheaper than renting them. For renting in Tampa-St. Petersburg to reign supreme, the median home price would have to jump 117 percent to $374,091. While high, this is less staggering than the 238.8 percent mortgage rate increase needed to tip the scale in favor of renting. Rates for Tampa-St. Petersburg buyers would have to reach 12.4 percent – an unlikely jump in the near future.
Despite hype over the Fed’s anticipated interest rate hike at the turn of the year,
mortgage interest isn’t the sole deciding factor behind home ownership affordability, nor is it the most threatening. As illustrated in the South Florida markets shown above, rising home prices face a lesser hurdle in order to tip the scales. Nationally, rates must double to tip the scale in favor of renting, while prices would need to increase by a lesser 67 percent to render renting the better deal.
Over the past year, rates dropped from 3.9 to 3.7 percent, but the buy versus rent costs remained virtually the same. Home prices – up 5.9 percent year-over- year – are rising faster than rents, which posted a 3.5 percent year-over- year increase. Unfortunately, steeper costs somewhat erased the anticipated benefits of plunging interest rates.
Therefore, while you may feel pressed for time to get some skin in the game given that buying is at its best deal since 2012, keeping an eye on local market shifts in price over interest rate hikes is key. For an expert opinion on the matter, consult with Ron Goldstein with Premier Sotheby's
*Jennifer Riner is a real estate, finance, lifestyle and home improvement writer whose work is published on various brands and outlets, including HotPads, Zillow, Trulia and Inman News.