Study: Renting beats owning
Cost of ownership rising faster than cost of renting in South Florida, report finds.
Don’t buy, rent — as long as you’re disciplined enough to invest the savings.
That’s the takeaway from a second-quarter housing index from professors at Florida Atlantic and Florida International universities.
They say steadily rising home prices in Palm Beach, Broward and Miami-Dade counties mean that consumers can create more wealth if they rent rather than own.
The Beracha, Hardin & Johnson Buy vs. Rent Index analyzes home prices, rents, mortgage rates and investment data in 23 metro areas nationwide to determine whether it makes more sense to buy and build equity or rent the same property and invest the money that would have gone toward owning.
“The cost of ownership — taxes, insurance, maintenance, etcetera — is rising faster than the cost of renting,” said FAU’s Ken Johnson, one of the authors of the study. “Now is the time to start becoming more leery. The market is topping, but I don’t expect to see anything close to what we saw in 2007.”
In recent years, buying versus renting was practically a toss-up in the tricounty region.
Even though renting is the better option now, buying still is a good choice for people who wouldn’t invest their rent savings in a portfolio of stocks and bonds, Johnson said.
“If you’re going to spend the savings on beer and cookies, for goodness sake, buy,” Johnson said.
Median home prices for existing, single-family homes top $300,000 in Palm Beach, Broward and Miami-Dade counties. The prices in all three counties are closing in on previous peaks set a decade ago.
Local Realtor boards are set to release August price data today.
Consumers won’t find much relief in the rental market, which continues to favor landlords. Rent increases have slowed, but renters still face a shortage of inventory.
“If people see something they like, they better act fast,” said L. Keith White, president of Reinhold P. Wolff Economic Research in Oakland Park.
Like South Florida, Pittsburgh, Portland, Ore., and Seattle are markets where renting beats buying, according to the index.
Only three of the 23 metro areas — Detroit, New York and St. Louis — favor buying over renting.
powers@sunsentinel.com, 561-243-6529 or Twitter @PaulOwers