Rent or buy? Florida’s housing costs make decision more complicated (2024)

TAMPA, Fla. (WFLA) — Is it better to rent or buy a home right now?

In most of the United States, it’s cheaper to rent an apartment than to buy a home, but in Florida, it’s another story.

Data by Zumper shows rent prices are down in most Florida cities except for the state’s capitol, Tallahassee.

Limited inventory during the pandemic pushed home prices up. Although inflation can be blamed for the increase in rental and mortgage costs, the price increases also boosted national inflation levels.

The Consumer Price Index shows housing costs were “the dominant factor in the monthly increase in the index for all items less food and energy” driving cost increases. Between rent and mortgages, or owners’ equivalent rent, costs were up 0.8% month-over-month. In the past year, the shelter cost index rose 7.5%

Florida remains a national leader when it comes to overpriced housing.

Florida Atlantic University put it in stark terms, reporting that six of the country’s 10 most overvalued housing markets are in Florida.

“It used to be that you didn’t need a big salary to afford a home in the Sunshine State, but those days are over because this has become a market mostly for move-up buyers and empty nesters,” Dr. Ken H. Johnson, a real estate economist at FAU’sCollege of Business, said. “Florida’s relatively low incomes should make housing affordability a key issue for a long time.”

In addition to higher home prices, mortgage rates are elevated compared to the recent past. The most recent measure of 30-year mortgage rates by federally-backed company Freddie Mac was 6.13%. While lower than the previous week, the Freddie Mac rate tracker only showed a 0.02% decrease.

“Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market,” Sam Khater, Freddie Mac’s Chief Economist, said. “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.”

For Floridians looking to buy a home, though, sales slowed down while prices jumped. The median sale prices for homes in 2022 rose 15.7% while the average sale price rose 11.3%, compared to 2021, according to Florida Realtors’ end of year data.

Florida home buyers spent almost $60,000 more on average in 2022 to purchase a house. The authors of the Beracha & Johnson Index, which measures home values compared to home prices, said increasing rental costs have an impact on Florida’s sale prices.

“We don’t expect home prices to fall sharply because our high rents serve to support current prices,” Dr. Elia Beracha, of Florida International University’s Hollo School of Real Estate, said. “Florida is a very difficult market to break into now unless you have a professional wage or the proceeds from a home sale in another state.”

Pricing is still an issue for other parts of the real estate industry. Realtor.com’s report on December rental trends and their 2023 housing forecast said they expected a higher number of rental homes to enter the market, but higher mortgage rates could lead to moderation when it comes to price growth for purchased homes. Additionally, they said costs will stay high, making affordability an issue as budgets are “squeezed.”

A Florida Atlantic University study found that rents across the U.S. were up beyond precedent. Citing the FAU data, Florida Tax Watch, a nonprofit, said “rental prices have grown so much that they surpassed the prices predicted by historical trends” and that nine markets with extremely overvalued rent costs were right here, in Florida.

“Rent in metropolitan areas like Miami, Tampa, and Fort Myers has drastically increased since 2020,” Florida Tax Watch said. They said part of the price changes may be due to the rise of remote work, which made some cities popular with those unattached to an office or looking for “an enjoyable place to live.”

ATTOM Data, a real estate analysis company, said it might be better to rent in 2023.

“Last year our study concluded that it was more affordable to own than to rent in 60% of the markets analyzed. But with mortgage rates doubling, monthly payments for new homeowners rose by 45-50% compared to a year ago, even though home price appreciation has slowed down dramatically,” Rick Sharga, executive vice president of market intelligence for ATTOM said. “This has made renting more affordable in the majority of markets, despite rental rates continuing to rise over the past year.”

According to the report, while rent is becoming more affordable, it’s not the same in every market, due to rapid changes across the U.S. in real estate.

As part of an analysis of ATTOM’s latest rental affordability report, Sharga told Fox News that picking between renting or buying a house was “like picking the lesser of two evils.” Focusing on rental costs, Sharga said the rates grew faster than home prices over 2022, but it’s still more affordable to rent in the majority of the country.

The report found that average three-bedroom rent prices rose past median sales prices on single-family homes in 46% of the markets analyzed for their study. Of more than 200 counties analyzed in the report, 103 had the average rents for three-bedroom apartments increase more than single-family home prices.

Additionally, that happened as 10 years of price spikes slowed down in the U.S., and mortgage rates rose alongside inflation and a declining stock market, including in Miami-Dade.

ATTOM said the gap in affordability between rent and purchase was larger in the largest U.S. counties. Even renting a home instead of buying one, rather than renting an apartment or condo, can be more difficult for average wage earners, according to ATTOM.

The study also found that rent prices and home prices were rising faster than average wages in most of the counties analyzed.

However, as Florida does, in some parts of the Sunshine State, wages are rising faster than rent. Hillsborough County, home to Tampa, has wages rising faster than almost two-thirds of the other counties surveyed in the ATTOM report.

Still, the company reported that areas like Vero Beach, Charlotte County, and West Palm Beach were among the least affordable counties to rent in the U.S. A separate analysis, focusing instead on seller profits rather than consumer affordability in residential real estate, found multiple Florida markets had big price increases.

“Those with the biggest year-over-year increases were inFlorida, led byNaples, Fla.(median up 26.9 percent);Fort Myers, Fla.(up 26.7 percent);Lakeland, Fla.(up 25.7 percent);Port St. Lucie, Fla.(up 24.6 percent) andOcala, FL(up 23.8 percent),” ATTOM reported. “The largest median-price increases in metro areas with a population of at least 1 million in 2022 came inTampa, Fla.(up 21.9 percent);Raleigh, N.C.(up 17.9 percent);Austin, TX(up 17.9 percent);Orlando, Fla.(up 17.7 percent) andTucson, Ariz.(up 17.2%).”

In terms of affordability, put simply, about 70% of Florida renters are cost-burdened by their housing expenses, according to Florida Tax Watch. It means they spend between 30% to 50% of their monthly income on rent. The organization reported that Florida rent prices had increased 36% since 2020.