Should you buy or rent a home? In South Florida, that decision is a no-brainer — for those who plan to stay and have the means, a new report shows.
The cost of buying in Palm Beach, Broward and Miami-Dade counties is 50 percent cheaper, the fifth-highest spread among the top 100 metro areas nationwide, according to real estate website Trulia.com.
It's cheaper to buy in every major metro because home price increases have leveled out over the past year while rental rates for apartments and single-family homes continue to soar, Trulia said. More young professionals are postponing homeownership, while other potential buyers struggle to qualify for mortgages.
"Rents have increased faster than home prices, and with fixed mortgage rates as low as they are, the advantage is to the homeowner because they can lock in a large percentage of the monthly cost, unlike a renter," said Greg McBride, a senior financial analyst with Bankrate.com in North Palm Beach.
In its calculations, Trulia factored property taxes and insurance into the cost of buying and assumed a 3.87 percent interest rate on a 30-year, fixed-rate mortgage. The website also assumed buyers made a 20 percent down payment, itemized tax deductions at the 25 percent bracket and stayed in the home for seven years.
The Trulia calculations didn't include homeowner's association fees. When those are considered, buying beats renting in South Florida by 34 percent. The tri-county region has the nation's fifth-highest median monthly HOA dues at $310.
Although the figures clearly favor buying, Ralph McLaughlin, housing economist for Trulia, said renting is the smarter choice for many South Floridians, including those who lack sufficient savings or who want to move easily for jobs elsewhere.
"If you don't plan to stay in the home for seven years, it's better to rent versus buy, even though rents are really high compared to prices," he said.
Home price gains have slowed across South Florida after double-digit increases in 2012 and 2013. Meanwhile, rents here are rising faster than they are nationally.
Thousands of rentals are being built across South Florida, but the new supply still doesn't match the rate at which South Florida developers built apartments in the last rental boom a decade ago, Axiometrics said.
Sarasota had the biggest buy-versus-rent difference, at 55 percent, while Fort Myers was next at 54 percent. Baton Rouge, La., (53 percent) and New Orleans (52) also ranked ahead of South Florida.
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