For millennials in South Florida, buying a home beats renting — but a shortage of affordable homes has left young locals and first-time home buyers trapped renting apartments they can barely afford.
Buying is 43 percent cheaper than renting a home in Miami-Dade County and 44 percent cheaper in Broward, according to a study that will be released Wednesday by online real estate company Trulia. Of the U.S.’s 100 biggest cities, only residents of Houston, Baton Rouge, Louisiana and Syracuse, New York get better value from buying a home instead of renting.
Trulia assumed that buyers would put 10 percent down, a more realistic figure for millennials and first-time home buyers than the standard 20 percent down payment.
“The fact that buying is a better deal is particularly surprising because home prices in South Florida have been on a tear over the last three or four years,” said Ralph McLaughlin, Trulia’s chief economist. “But rents are going up quickly too.”
$1,955Median rent in Miami-Dade
In Miami-Dade, the median price for single-family homes and condos was about $241,000 in September, compared to a median monthly rent of $1,955, the study found. Broward also has high rents ($1,750 per month) compared to home prices ($200,374). When you do the math, renters in South Florida spend more per month than they would on a mortgage without the benefits of building equity in a home.
But finding a home to buy isn’t easy. “Even though it’s cheaper to buy than to rent, that doesn’t mean that [South Florida] is a cheap place to live,” McLaughlin said.
Putting together a down payment can be a challenge.
“The rent is so high that it makes it hard to save up,” said Michael Neves, who works at a resort in the Keys. Neves pays $1,000 per month to rent a three-bedroom home in Key Largo. That may not sound like a lot but the median sales price for a home in Monroe County is $428,000.
Across the region, real estate agents say that modestly priced homes in decent neighborhoods spark frenzied bidding wars, and investors who put down cash almost always beat out locals who need mortgages. Buyers complain that many homes they come close to purchasing end up failing the strict inspections required by first-time home buyer programs.
There simply aren’t enough affordable homes on the market to meet demand, said Ron Shuffield, president of EWM Realty International.
“A lot of investors are buying up properties in this price range because they’re so easy to rent out,” Shuffield said. “These are what the median income earner in South Florida can afford to rent.”
About 70 percent of homes sold in South Florida cost less than $300,000. Miami-Dade has a two-month supply of single-family homes under $300,000 and a four-month supply of condos under $300,000, according to EWM. Broward’s numbers are similar.
A healthy market usually has between six and nine months of supply.
The rent is so high that it makes it hard to save up.
Michael Neves, home buyer
One market that may see rent relief in the coming years is downtown Miami. Developers are building more than 3,200 rental apartments downtown, with about 1,000 expected to hit the market next year, according to the tax-funded Miami Downtown Development Authority.
“Rental will continue to be a good market,” said developer Carlos Melo, who is building two rental projects downtown. “When you’re young and you don’t have a family, it’s much harder to buy.”