Is it more affordable to rent or buy right now? Here’s what the data suggests

With a rapid rise in mortgage rates making homeownership unaffordable, and record demand for rental units in South Florida, residents are facing a pressing question: Is it more affordable to rent or buy?

In a normal market, the decision is often interchangeable. When rents are high, people can find relief in lower home prices. And when housing prices have risen, a rental unit can often be a more affordable option.

But in this market, where both rental and housing prices are skyrocketing due to low supply, some experts lean toward renting being the slightly less expensive option when taking into account rising interest rates, soaring home appreciation, and the cost of a down payment.

The recently released Buy vs. Rent Index from Florida Atlantic University suggests that it’s marginally better to rent now rather than buy, and reinvest any extra money.

“It’s a hard choice,” said Ken H. Johnson, real estate economist with Florida Atlantic University. “One way to look at rents is that it’s a really high premium to pay for not having to lock into homeownership.”

Another study from Johns Burns Real Estate Consulting, a research and consulting agency, also argues that renting could be cheaper than buying when factoring in a mortgage payment and general maintenance for the home.

When comparing the median price of a single-family starter home to the rental price of a single-family home, researchers found a significant gap in price growth, in part due to the rapid rise of mortgage rates. Mortgage rates have jumped over the past seven months to almost 6%, from about 3% in January.

Homeownership for a single-family home saw 41% year-over-year growth in price compared to 10% growth for a similar rental for the overall South Florida region, researchers found.

For Palm Beach County, the firm found that housing costs were up 52%, while single-family rents were up 12.5% and apartment rents were up 28.5%.

— Housing monthly payment: $3,716

— Single-family rent: $2,878

— Apartment rent: $2,414 “The cost to build has been so tremendous that they (builders) are passing those costs on to the homebuyer. And payments for single-family homes depend on mortgage rates, which are going up. Home prices are also going up as well,” said

Lesley Deutch, with Johns Burns Real Estate Consulting in Boca Raton.

DOES THAT MEAN RENTS ARE AFFORDABLE?

Rents are still skyrocketing — renters in South Florida are paying on average 22% more than the long-term projection of what the rental price should be, according to a rental index released this week by researchers at Florida Atlantic University, Florida Golf Coast University and the University of Alabama.

The typical rent in South Florida is $2,862, while the long-term trend suggests that rents should be around $2,332.59. That’s a $529.41-per-month difference.

“Florida’s rising rents only serve to exacerbate the ongoing housing crisis in the state,” Johnson said. “The Fed’s interest rate increase will price more people out of the housing market and keep them as renters — and as long as the demand for renting remains high, rental rates almost certainly will stay elevated as well.”

Adding to the rent-vs.-buy quandary, the uptick in the mortgage rates has already added almost $700 to the average mortgage payment in South Florida, when compared to a year before, according to an analysis from Zillow.