Business Monday

In today’s market, home ownership has financial edge over renting

Deb Marton
Deb Marton

With the recovery of the housing market, the desire to own a new home has returned. However, prospective buyers continue to lease condos, homes and apartments because they’re confused and sometimes overwhelmed by all the pieces of the home-buying puzzle. As they continue to rent, prospective buyers miss out on the benefits and savings that can be realized through home ownership. As a real estate sales agent, putting together all of the pieces to the puzzle of home ownership for the client is key to demonstrating the advantages and benefits of ownership.

South Florida’s rental market rates are at an all-time high and continue to escalate into uncharted prices for the region. In Broward County, rental rates average $1,283 a month. This represents a 4.5 percent year-over-year gain — and increases are expected to persist, according to MPF Research. Renting can be described as a lifestyle choice and people enjoy the flexibility that comes with it, but what they don’t realize is that today they can actually own for less.

A critical piece of the puzzle for first-time homeowners is how purchasing a home yields positive outcomes on a personal and monetary level. Homeowners not only receive great pride of ownership, they build equity toward their future. Home ownership, particularly for newly built residences, allows owners to project a fixed cost of living. With interest rates at an all-time low, buyers lock in their mortgage rates as opposed to the unknown of annual rent increases. Keeping payments fixed allows homeowners to build wealth during periods of growth like we’re seeing in South Florida.

Right now, in the Broward market, buying is more economical because rental rates are on the rise. A common misconception is that owning a new home is more expensive than renting; however, in many cases, home ownership can offer significant annual savings. We surveyed the city of Tamarac where the average monthly rent for a relatively new, 1,300-square-foot, three-bedroom, two-bathroom apartment is currently $1,850. Upon factoring in the numerous additional monthly fees, including parking and trash collection, the average annual total cost to rent is $24,800. In the same market, a brand-new construction 1,800-square-foot, four-bedroom, 2.5-bath single-family home currently costs $280,000. Given the assumptions of a 20 percent down payment at an interest rate of 3.85 percent on a 30-year fixed mortgage, if this same renter were to purchase the single-family home, annual payments would total $20,943, giving the homeowner an annual savings of $3,856.90. (See chart.) The advantages of home ownership become clear as the puzzle comes together.

Another important piece to the puzzle is to educate buyers on mortgage prequalification. Buyers should make sure they are prequalified at the start of the home-buying process to determine the price point that they qualify for and their financing options. There are myriad financing options available depending on the buyer’s circumstances. Often FHA loans are a viable option for first-time home buyers.

“The FHA loan limit is $345,000 for single-family homes in Broward County,” says Matt Andre, loan originator and branch manager at FBC Mortgage, LLC, based in Longwood, near Orlando. “These loans require only a 3.5 percent down payment from the buyer. Conventional financing is also available with as little as 5 percent down, and another great option is available to active-duty military service members and/or veterans with no down payment at all.”

Communities like Central Parc in Tamarac are seeing a strong demand for new-construction single-family homes from a South Florida leasing audience. Buyers are seeking a lifestyle in centrally located, community-based neighborhoods with amenities at attainable prices that allow them to live comfortably within their means. Through community associations and their inherent economies of scale, many master-planned communities allow homeowners to live a low-maintenance, worry-free lifestyle. This affords new homeowners to live a lifestyle similar to what they were accustomed to as renters while now building equity as homeowners and incurring annual savings.

The home-buying process can often be confusing for renters who are considering home ownership. Once all of the pieces to the puzzle have been put together, however, it becomes clear that buying a home provides numerous advantages, including significant annual savings. With strong demand for a specific product, it’s important to take the time to educate buyers. In order to do so, agents must have the right tools to assist their buyers in completing the puzzle known as home ownership.

Deb Marton, a Realtor, is director of sales at Central Communities and has more than 20 years of experience in new-home sales. She can be reached at 954-556-6754.

A previous version of this article incorrectly identified Central Communities.

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