A housing shortage in Palm Beach County has spike home prices.
The median price for a single-family home sold in Palm Beach County in February hit a historic high of $450,000.
Palm Beach Post
In South Florida’s harrowing real estate scramble, it is better to rent than buy, but just barely, and the tables may be turning soon.
Palm Beach, Broward and Miami-Dade counties came in 83rd in a new report on the nation’s top 100 housing markets in which the higher the ranking, the more equal the monetary benefits are between signing a lease and signing a mortgage.
“Both renting and buying are expensive right now, but we can still say which one on average is relatively better in this market,” said Ken H. Johnson, a Florida Atlantic University real estate economist who worked on the report with Florida International University researchers. “In South Florida, it’s almost a toss-up.”
Building boom continues: Why South Florida builders are bucking the national downward spiral in new home construction
Pricey purchase: Lennar to finish buildout after $190 million land buy at new Arden community near Wellington
Drugs and real estate: Miami developer buys infamous Florida home tied to money, glitz and overdose deaths
That’s not the case in other Florida markets where renting currently has a far larger pecuniary advantage over buying a home.
Tampa ranks 15th in the report, followed by Jacksonville (17), Sarasota (19), Lakeland (21), Orlando (32), Daytona Beach (37), Melbourne (45) and Fort Myers (53).
While FAU and FIU have issued previous studies looking at renting versus buying, they were quarterly, included fewer markets and used a different methodology. The latest report, released Sept. 14, uses July data in a traditional price-to-rent ratio where the median home price is divided by the median annual rent.
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, you pay $1 in rent.
The new report 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 southeast Florida, the historic price-to-rent average is $12.57-to-$1. However, the current price-to-rent is $13.72-to-$1. The difference between the two is a premium of about 9%, meaning it is slightly better to rent than buy.
The last time the benefits of buying and renting were close to equal — less than a 1% difference — in southeast Florida was in 2017. In 2015, the difference between the historic and actual price-to-rent was -7.44%, signaling it was better to buy than rent.
“At a time when prices are really high and it’s almost a tie between renting and owning, I would rather rent to avoid the possibility of having the market go down significantly and losing equity,” Johnson said. “Someone else might want to take that risk.”
That doesn’t mean rent is cheap, Johnson emphasized.
Last month, the private Palm Beach Atlantic University in West Palm Beach bought four townhomes just south of the school for $2.8 million as a way to create affordable housing for its faculty, staff and graduate students.
“President Debra A. Schwinn has made academic workforce housing a priority and the university is partnering with other colleges and universities, as well as city and county officials, to ensure there will be enough such housing,” the school said in a statement.
Renting came out on top in all 100 markets studied but with steep swings in how much better it is to rent versus buy.
Spokane, Washington, had the highest deviation from the historic average at 32%, ranking it first on the list for renting over buying. Austin, Texas, ranked second with a deviation of 30%, followed by Nashville’s 27%.
At the other end of the spectrum were Syracuse, New York, Virginia Beach and Stamford, Connecticut, which had the lowest differences between the historic average, meaning it was still better to rent in those areas, but only by a small margin.
“It will ultimately be the production and delivery of new homes and apartments that will drive long-term housing affordability in the area,” said William Hardin, dean of FIU’s College of Business. “The recent spike in (southeast Florida) rents has helped keep the price-to-rent ratio relatively near its average.”
COVID-19 migration: Who’s moving to Florida and why there’s a New York exodus
New eats, updated homes: Moe’s Southwest Grill co-founder has big plans for West Palm Beach and Lake Worth Beach
Home alone: Downtown West Palm Beach’s last single-family home; ‘We’re not going anywhere’ owner says
Jeff Lichtenstein, president of Echo Fine Properties, said he believes Palm Beach County’s market has already shifted to where it’s better to buy than rent.
Home sale prices settled over the summer with 32% of single-family homes for sale slashing listing prices in August, according to online brokerage firm Redfin. That was up from a nearly 10-year low of 10% in February.
A Florida Realtors report pegged the median price on a single-family home in July at $600,000, up 20% from the same time in 2021 but down from $620,000 the previous month.
According to online apartment rental platform Zumper.com, rent for a one-bedroom apartment in West Palm Beach peaked in May at $1,811. It dropped to a summer low of $1,650 in late August and squeaked up to $1,700 this week.
“Renting was the better option during the pandemic as the housing sale prices went up so fast,” Lichtenstein said. “Now prices have stabilized or dropped, but the rental market has not slowed down or eased in the same way.”
There’s also more to consider than just the monetary benefits of renting versus buying, Lichtenstein said.
Job stability, familiarity with the area and long-term goals need to be factored into the decision.
“Your own personal world picture is really important,” Lichtenstein said.