In the classic rent vs. buy debate, we’ve seen plenty of experts make passionate defenses for both sides. Then there are people like Kelly Foley who are left to wonder why there’s even a debate to begin with.
Foley is a data analyst who moved to South Florida from Michigan a few years back with her husband. Their first place was a two bedroom home in Oakland Park that they rented for $1,650 a month. Two months ago, they bought a three-bedroom home with a pool in Delray Beach for $190,000. It’s a bigger home, and they’re mortgage payment is only $1,430.
“Oh, definitely, we really got a lot more bang for our buck,” exclaims Foley. “We’ve got so much more, and now we own it.”
Buying Sooner Rather than Later
With rent prices and home values escalating in Florida, buying has become a comparatively better option in the short term for many potential buyers. Despite many challenges facing first-time buyers in these areas, real estate heavyweights like Zillow are recommending buying sooner over renting for longer.
Zillow’s website has shown that buying a home in Palm Beach County is cheaper than renting it if you’re planning on staying there for at least two years. In other nearby counties, this time frame is even shorter.
The break even point has dropped to a single year in the following communities:
- Coconut Creek (9 months)
- Lake Park (9 months)
- Tamarac (7 months)
- Greenacres (7 months)
- Lake Worth (6 months)
- Lauderhill (6 months)
The break-even point for buying is pretty quick for three of the largest metro areas in Florida, including:
- Orlando (1 year)
- Tampa (1.1 years)
- Tri-county South Florida (1.2 years)
Compare these to some of the metro areas on the other end of the spectrum:
- Phoenix (3.3 years)
- Boston (4 years)
- Washington, D.C. (4.2 years)
Traditionally speaking, people would need to stick around for half a decade at least before buying made fiscal sense.
Homebuyers Looking at Their Role Differently
Although any real estate expert would still tell you that buying a home should be considered a long-term investment, the statistics show that some people are taking a different approach. Zillow’s data, for instance, shows that it could be worth it to buy even if you’re only planning to be there a few years.
“Even if you’re not going to stay in it for very long, it will pay off,” explains Jackie Smith, a hardworking real estate agent with Balistreri Realty in South Florida.
One of Smith’s recent clients just made the switch from renting to owning. He had been living in his rented apartment for just over 3 years at $1,100 a month. Smith then showed him a waterfront condo that could be purchased for $165,000 (monthly mortgage of $850) that was close by. She reports that it was a fairly easy decision for her client to make.
Zillow had to compare all applicable costs for buying and renting in order to produce an accurate measure. These costs included:
- Up-front fees
- Closing costs
- Mortgage payments
- Estimated monthly rent
- Property taxes
- Insurances (renter’s and homeowner’s)
- Maintenance fees
Their analysts also compared historic and expected home value appreciation rates to estimate the break-even period for these housing markets.
“If a home appreciates in value over time, you will capture that because you will have equity,” explained Svenja Gudell, acting director of economic research at Zillow. “If rents increase over time, it just means your costs are going up.”
Some Still Not Ready to Buy
The average rents for both apartments and single-family homes has increased steadily over the last few years, mainly due to a growing number of potential buyers that can’t qualify for a workable mortgage. But people continue to look for new rental opportunities despite the higher cost.
It stays the more attractive position to take for 4 primary reasons:
- Many of these potential first-time buyers don’t have enough money saved up to make that down payment.
- Others are simply waiting for home values to drop.
- Some are leery of the maintenance concerns that come with owning your own home.
- There are also the few that feel the need to stay mobile in case new opportunities arise.
Looking at this report, we do hope to see even more homebuyers making their way to Orlando. There are a lot of great opportunities and listings for first-time buyers and veterans a like.