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Renting vs owning: The best choice for a home might surprise you

Sun Sentinel logoSun Sentinel 6/22/2021 Amber Randall, South Florida Sun-Sentinel
a house that has a sign on the side of a building: A house for sale in Boca Raton on Thursday, June 17, 2021 © Michael Laughlin/Sun Sentinel A house for sale in Boca Raton on Thursday, June 17, 2021

The choice of whether to rent a home or buy one is becoming tougher in today’s hot real estate market, and renting might be a better choice than you think.

The conventional wisdom is that the tax benefits of buying a house make it preferable if you can afford the down payment. When rents are high, buy. When homes cost too much, rent.

The decision becomes more complex, however, when median homes prices are as high as they are now and rents are rising swiftly, too.

Renting might be the best decision if you don’t plan to live in a home at least five years, you can’t make a substantial down payment (at least 20%) and you are unfamiliar with the South Florida area, real estate experts advise.

“I feel like the time to rent is when you can’t find a home that meets your criteria, or the homes are out of your budget and you need to bolster your savings,” said Bonnie Heatzig, executive director of luxury sales at Douglas Elliman in Boca Raton.

A recent analysis from LendingTree, an online lending site, found that it is cheaper to rent in all of the nation’s 50 biggest metro areas, including South Florida. But the difference was closer in South Florida than in most metro areas.

The difference was the greatest in New York, where the median rent was $1,363 cheaper per month than the median mortgage payment — the biggest gap in the country, LendingTree said.

The gap in South Florida was the 36th smallest of the 50 metros, based on census data. The median rent ($1,363) was $466 cheaper than the median mortgage ($1,829).

Jacksonville ranked 47th, Tampa 49th and Orlando 50th — meaning the costs of renting versus buying were closer there than anywhere.

The cost of buying might come closer to renting in Florida because home prices are so high, making a mortgage more expensive. New estimates from Zillow, an online real estate marketplace, show that the typical home value rose 10.7% from last May in South Florida — and 1.5% from the previous month.

Whether the home will keep its value is a concern for potential homebuyers.

“Home values have gone up so much that the down payment may be more than you would originally put down,” said J.C. de Ona, president of Centennial Bank’s Southeast Florida Division. “If you buy now at a certain price, and the market cools down, will you get the appreciation you think you will get?”

For people who have just made a cash sale on their home in this market, the best decision is probably to rent while waiting for the market to correct itself, according to appraiser Charles Siebrecht of Professional Real Estate Advisors LLC in Palm Beach Gardens.

“Moving laterally or up in this environment will surely increase your real estate tax liability. This would seem to be an ideal time to downsize if that opportunity exists,” he said.

But choosing to rent over purchasing a home in this hot housing market doesn’t come without risks, experts said.

The demand for a home in South Florida is making it increasingly difficult to find even a rental to stay in, causing rents to also spike. It may be at least another year or two before the housing market cools off enough, if at all, meaning that potential homebuyers could be waiting awhile.

“It’s better to try and buy a single-family home if you can, because people are taking whatever they can get. For rent or buying, there just isn’t enough inventory in either category,” said Thomas Grimshaw, real estate adviser with Compass Florida in Miami.

Waiting out the current housing market also runs the risk that interest rates will rise.

“The mortgage rates are very low right now from an affordability factor,” de Ona said.

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