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Deciding whether to rent or buy a home? Right now, it’s a coin toss for most of the U.S., according to the Buy-vs.-Rent index by two local universities.
You can’t make a really bad decision in terms of building wealth.
But in South Florida, where home prices are high, many consumers are “better off building wealth through renting and investing in stocks and bonds than buying property,” said Ken Johnson, real estate economist and professor at Florida Atlantic University in Boca Raton.
Eli Beracha, associate professor at Florida International University in Miami, who co-created the index, said on average, “both home and rental prices have experienced modest gains in recent months, while financial markets continued to deliver healthy returns.”
Rising home prices in Palm Beach, Broward and Miami-Dade counties makes it more difficult for consumers to buy a home. Although rents also have increased, they’re rising slower than the cost of buying and maintaining a home, which includes taxes, insurance, and maintenance, the professors say.
Another consideration in South Florida: “most of the ‘buy low’ deals are out of the market,” Johnson said.
“This does not necessarily mean that it is a bad time to purchase. It simply means that potential purchasers should bargain more aggressively,” he said.
Johnson said there are also personal factors in deciding whether to buy or rent. Less-disciplined savers and investors, for example, may do better investing in a house to build wealth over time.
But young, mobile workers are better off investing in today’s robust stock market than a home, he said.
Still, Johnson said those who want to buy a home or who have one already shouldn’t be afraid. “The market is not going to turn over and lose 30 percent of its value in South Florida. You will find someone to buy your home,” he said.
Yet, one factor that could change the scenario are tax reform proposals now pending in Congress. If consumers receive almost double the current standard deduction and the mortgage interest deduction is cut in half — as proposed in bills — there will be less financial impetus to buy a home, Johnson said.
But that’s an analysis for another day, he said.
“The market is not going to turn over and lose 30 percent of its value in South Florida. You will find someone to buy your home.”
Ken Johnson, real estate economist