Why should you buy vs. rent? How much time do you have?

Why should you buy vs. rent? How much time do you have? 

Bottom Line: I can start with the latest news. A Reuters conducted study of real-estate analysts nationwide found housing appreciation is pacing 5.7% for the next twelve months. What does that mean? Let's bring that conversation to South Florida for a moment. Here are the current median home values across all property types: 

Palm Beach County: $264,000 

Broward: $249,000

Miami-Dade: %294,000 

At 5.7% here's what those numbers will be a year from now: 

Palm Beach County: $279,000 (+$15,000) 

Broward: $263,000 (+$14,000) 

Miami-Dade $311,000 (+$17,000) 

Now that one-year appreciation could be yours or a landlords. But that's just the start of the conversation. According to data from Rent café here are the most recent year over year rent rate increases in the tri-county area: 

Palm Beach County: 6% 

Broward: 6.1% 

Miami-Dade: 7.2% 

So not only do you lose out on the appreciation but you're also paying a rent rate increase that's exceeding even the pace of property appreciation! That's a really happy landlord. That leads to the value of a fixed rate mortgage. While your rent rates will continue to rise overtime – with a fixed rate mortgage you can keep all but the insurance and property tax expenses from rising overtime. What's more is that it's still generally cheaper to buy and make a mortgage payment than to rent and make a rent payment. But that's still all stuff that's based on current data. Historical perspective is valuable too.  

The average annual rate of home appreciation historically has been 4%. So, let's take a $250,000 home for a moment. If you took out a thirty-year fixed rate mortgage that home would be worth $828,000 after 30 years. That's $578,000 lost to the happy landlord. What's more is that according to the Census Bureau's most recent data 77% of the average American's net worth is in the form of home equity. If you don't own a home, on average, you'd only have 23% of the net worth overtime on average. There's actually a lot more that I could do to demonstrate the value but the bottom line is for almost everyone – if you're intending to stay in place for a minimum of three years it's a far better value to buy rather than rent if you can.  



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