JACKSONVILLE, Fla. – It’s a question on the minds of thousands of Floridians searching for a home this summer: Should you buy a house in this overheated market, or rent and wait until things cool off?
One real estate economist is urging Floridians to rent because homeownership is too expensive right now.
Low inventory, low interest rates and historically high demand for homes have created a housing market that hasn’t been this overpriced since the leadup to the 2008 economic crisis.
According to a new report released by Florida Atlantic University’s College of Business, buyers in Jacksonville are paying 23% more money than they should be for homes. Homes in Tampa are overpriced by 32%, Orlando by 21% and Miami homes and 16.9% overvalued.
Real estate economist and associate dean at Florida Atlantic University Ken H. Johnson points out, the investment market is stronger and more stable than the housing market, which is why he’s urging Floridians, to rent instead of buy.
“Individuals should consider renting a similar type property, and then reinvesting the money they would have spent on a down payment, property taxes, maintenance insurance, etc., and take that money and invest it, and there won’t be that much of a difference, that’s a better way to go right now,” Johnson said.
Johnson said the cost of renting a house in Florida has spiked as well, but not as much as the price of homes, which in many circumstances are selling for more than they appraise. Johnson says the higher price you pay today, the tougher it will be to get a return on your investment.
“Right now, housing prices are so high and appreciating so fast there in Jacksonville, perhaps it’s time to rent and reinvest. On average, buying and renting are close, but renting and reinvesting is going to win,” Johnson said.
Johnson said he expects home prices to eventually go flat. He doesn’t expect the economic bubble to burst as it did in 2008, but he predicts interest rates will cool things off.
“The interest rates going up will probably trigger the slowdown, we are not going to build enough houses, property fast enough, or stop people from moving to Florida, it’s going to be an interest rate trigger that will drive things as a state as a whole moderating the housing prices,” he said.
To put it into perspective, just how fast the price of houses in Jacksonville are appreciating.
Just two months ago, Jacksonville homes were overpriced by 18%, and now it’s 23%.
Of course, Johnson’s advice doesn’t work for every family in every situation, but if you can afford to wait to buy, it could save you thousands of dollars.