By Robyn A. Friedman
City & Shore Magazine
Is it better to rent or to buy? With housing prices so high in South Florida, not to mention a limited inventory of available homes on the market, it might be tempting to rent until the market cools. But renting an apartment here can also be pricey. Hence the quandary: What to do if you’re planning a move?
According to trade association Florida Realtors, the median sales price of a single-family home in South Florida was $359,900 in June, up 4.3 percent year-over-year. The median sales price of a townhouse or condo was $205,000, up 10.6 percent.
Apartment rents are rising as well. According to RENTCafé, an apartment-search website, the average rent in Fort Lauderdale in June was $1,861, up 2.5 percent from June 2017. Rents in Boca Raton rose similarly, from $1,879 in June 2017 to $1,939 in June 2018. Obviously, tenants save money over homeowners because they don’t pay property taxes, repairs and maintenance or homeowners insurance on the structure. On the other hand, tenants lose the tax advantages of homeownership as well as the opportunity to build equity.
The latest Beracha, Hardin & Johnson Buy vs. Rent Index, produced quarterly by Florida Atlantic University and Florida International University faculty members, shows that South Florida renters may have a slight competitive edge over home buyers in building wealth — at least at the moment — as long as they invest the money they’d save each month by not paying a mortgage, taxes, insurance, homeowners association fees and maintenance.
“All of these costs are rising faster than the cost of renting a comparable property,” says Eli Beracha, Ph.D., co-creator of the Index and an associate professor at the Hollo School of Real Estate at FIU. “Therefore, renters who take the money they’re saving each month and reinvest it are going to build wealth faster than those who buy a home, on average.”
It’s important to note that the decision to rent or buy depends on your location. In cities like Atlanta, Denver, Seattle and Miami (including the Fort Lauderdale and West Palm Beach metro areas) that are nearing the top of their current housing cycle — meaning that they are above their long-term pricing trends — the Index points toward renting. But in markets that are below their long-term pricing trends, such as Boston, Chicago and Philadelphia, buying and building equity is the superior option, according to the Index.
“If you rent and reinvest, on average, it’s slightly better in terms of wealth creation to be renting in southeast Florida right now,” says Ken Johnson, Ph.D., a real-estate economist and one of the Index’s creators at FAU’s College of Business.
Johnson says, however, it’s still a good time to buy. “I’m very positive about home ownership because it gets you something more than just an investment — it gets you a place for your kids to grow up in,” he says. “Just know that you’re above the pricing trend a little bit, so bargain aggressively.”
Consult your financial advisor as well for input on the best strategy for your own personal situation.