Home News Renting still better than buying a home in Palm Beach County but the gap is narrowing

Renting still better than buying a home in Palm Beach County but the gap is narrowing

Renting still better than buying a home in Palm Beach County but the gap is narrowing

Apartment for rent. (Dreamstime/TNS)

The gap between whether it’s fiscally better to rent or buy is narrowing in South Florida, but experts say signing a lease still holds an economic advantage over signing a mortgage.

Palm Beach, Broward and Miami-Dade counties came in 62nd in a report on the nation’s top 100 housing mspanrkets in which the higher the ranking, the more equal the monetary benefits are between renting and buying.

The report, by Florida Atlantic University and Florida International University on January housing numbers, found that areas where it is highly favorable to rent over buying include McAllen and Houston, Texas, San Jose, California, Nashville, Tennessee, and Durham, North Carolina.

Only one Florida region — Jacksonville — was in the top 10 areas where renting is much better than buying.

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“We are just not that overpriced as compared to other parts of the country, but that doesn’t mean that prices are OK,” said FAU housing economist Ken H. Johnson about southeast Florida. “We do have an affordability crisis here.”

Just two markets nationwide had conditions where buying was better than renting. They included Springfield, Massachusetts, and Cape Coral on Florida’s southwest coast. But the Cape Coral market, which includes Fort Myers, is likely skewed because of the lingering impact of Hurricspanne Ispann on housing.  

The median price to buy a Palm Beach County single-family home in February was $582,500, which was a 10.6% increase from the previous year, according to the Florida Realtors.

The median monthly rent for a two-bedroom apartment in Palm Beach County ranged in January from $2,295 in West Palm Beach to $2,734 in Boca Raton, and up to $3,138 in Jupiter, according to online rental company Zumper.com.

Sale pending at a home for sale in West  Palm Beach, Florida on June 30, 2022.

While the university study’s data may not exactly align with what is reported by Florida Realtors or Zumper, it uses a traditional price-to-rent ratio to calculate the benefits of buying versus renting.

For example, a home that cost $400,000 to purchase and is renting for $20,000 annually would have a price-to-rent ratio of 20-to-1, meaning for every $20 in purchase price for a home, you pay $1 in rent.

The study then looks at a seven-year average to get an idea of how much of a swing is occurring either way and ranks each market.

In southeastern Florida, the historic price-to-rent average as measured in January was $12.49-to-$1. However, the actual price-to-rent was $13.33-to-$1. The difference between the two is a premium of 6.7%, meaning it is slightly better to rent than buy. Anything higher than zero means it’s better to rent. A negative percentage means it’s better to buy.

In January 2021, the premium in southeast Florida was nearly 10%.

The last time the benefits of buying and renting were close to equal — a less than 1% difference — in southeastern Florida was in 2017. In 2015, the difference between the historic and actual price-to-rent was negative 7.44%, signaling it was better to buy than rent.

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Paul Vota, who owns several rental properties, said his two-bedroom apartments in Riviera Beach lease for about $1,500 a month. It’s a price that could increase based on hikes in his insurance and property taxes, but one that still draws a lot of interest. On a recent Thursday, he had four separate prospective renters look at an apartment he had listed just hours earlier.

“There is a shortage of rentals, and people are jumping over themselves to find a place,” Vota said. “The insurance is out of control, and I just have to keep raising the rent. I don’t do this for practice — it’s for profit.”

Johnson is not predicting a real estate crash such as what happened beginning in 2008, when bad loans and adjustable-rate mortgages caused an epidemic of loan defaults and foreclosures. But, he said, in many cases peoples’ incomes will have to increase before buying a home over renting is feasible.

Kendra Wilson receives the keys to her new home from Habitat for Humanity of Greater Palm Beach County on Friday, Feb. 16, 2023. The home is on Northwest 11th Avenue in Boynton Beach. Wilson is a mother of three who grew up in Delray Beach and works as a  phlebotomist.

“Rents are overpriced, home ownership is overpriced, and we’re not building fast enough,” he said.

Until buying is an option, Alex Platt, principal agent for the Platt Group at Compass, recommends renters ask that leases include language saying that annual rent increases won’t go up more than 3%.

But renters hoping to buy have more options to choose from as the inventory of homes for sale slowly grows. That also means sale prices are stabilizing.

“People are not getting a huge discount by renting anymore,” said Platt, noting that renters who had been holding out waiting for a price crash are realizing that’s unlikely to occur, even with higher interest rates scaring away some buyers.

On March 9, the average rate for a 30-year fixed mortgage was 6.73% according to Freddie Mac. That’s nearly double the 3.76% it was at the same time in 2022.

“The bust some people predicted isn’t really happening,” Platt said.


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