With The Housing Market Heating Up, A New Study Explores Whether Buying Or Renting Is The Better Choice
Rent prices in South Florida are projected to continue rising, but fortunately for residents, it won’t be by a drastic amount, according to an insightful study conducted by researchers at Florida Atlantic University and Florida International University.
Understanding the Price-to-Rent Ratio
In many metropolitan areas across the nation’s East Coast, including the greater Miami region, there are indications of future price increases. One key metric in the study is the Miami region’s price-to-rent ratio, which comes in at 13.47. This ratio is a valuable tool for understanding the relationship between property prices and rent. It’s calculated by dividing the amount of money spent on property prices by the amount spent on annual rent.
The study revealed a key threshold for this ratio. If the price-to-rent ratio is below 15, it suggests that property prices will likely increase, and residents would find greater financial benefit in buying a home rather than renting. Conversely, if this ratio is 21 or more, residents are better suited to rent. In South Florida’s current climate, the study implies that buying could be a more strategic choice if financially feasible.
Insights from Experts
Ken Johnson, a real estate economist at FAU’s College of Business, shared his views on the subject, saying, “Low means you should own.” He predicts that home prices won’t undergo significant fluctuations in the near future, adding, “You should see less volatility in prices. We just don’t think prices will move around that much. … I don’t think you’re going to buy a home and see prices crash dramatically, you know, six months from now.”
This aligns with recent research that concluded that waiting to buy or even rent might not be wise, as prices are unlikely to drop. Johnson also expressed confidence that salaries in the region would keep pace, noting, “I feel pretty comfortable in saying that the average salary will go up at a greater percentage than the average rent will.”
Challenges: Housing Supply and Affordability
The major challenge facing South Florida’s housing market is the lack of adequate housing units. Even with a slight slowing in population growth, the current supply struggles to meet the strong demand. Johnson acknowledged, “It’s very difficult at this point in time to build affordable houses.”
Patty Da Silva, a broker with Green Realty Properties in Cooper City, also identified this core issue, stating bluntly, “We don’t have enough housing, period.” Like the researchers, she advised that buying is currently more advisable than renting if one has the means, adding that a marketplace of homeowners is more resilient than one of renters.
Population Growth and Future Concerns
Another trend impacting the region is a slowdown in population growth. This could negatively affect price performance or the stability of prices. For example, while the Miami-Dade, Broward, and Palm Beach tri-county area is projected to see only a 6.8% population increase over the next decade, Orlando may experience a rise of 22.5%.
William Hardin, FIU’s College of Business dean, acknowledged this issue but indicated that it’s a problem to be addressed later. He said, “Right now, we are still dealing with an inventory shortage that is helping to create a major housing affordability problem across Florida.”
The research provides a complex yet accessible picture of South Florida’s housing market. The underlying theme is the need for more housing and the potential wisdom in buying rather than renting if possible. But with population growth slowing down and the challenges of building affordable housing, the market’s future demands attention, foresight, and innovative solutions to continue to meet the needs of the community.