The latest rent ratios
were released by Moody’s and can be seen in this New York Times article, giving
support to the argument that in South Florida at least it is looking
like it is more worthwhile to buy than to rent in today’s market of
depressed home prices.
The rent ratio is the purchase price of the property divided by the annual cost of renting that property. The premise is that if the ratio is more than 20 (as in New York City for example), it is a better economic decision to rent. When the ratio is less than 15, the advantage tilts to owning. Between 15 and 20 is up in the air, but of course these ratios do not take into consideration potential price appreciation.
Because of the low prices and amazing
opportunities in the Boca Raton, Delray Beach, and Highland Beach real
estate market, I believe that now is a great time to buy. An average
Boca Raton Florida house that would sell for $500,000 (which used to
fetch closer to $1,000,000 just four years ago!) would rent for
approximately $3500/month. This would be a rent ratio of under 12% which
according to this theory would heavily favor buying over renting. So
for those of you sitting on the sidelines, wondering if it makes sense
to plunge into this market, I say now is a great opportunity. Prices and
interest rates are very attractive; this is really a great time to buy!
What do you think?
Please comment and get the discussion going. Are you willing to dip your
toes into the Boca Raton FL real estate market, for a residence or as
an investment? If not, what is holding you back?
Gloria,
Posted by Todd Dawkins on Wednesday, January 5th, 2011 at 8:48pmI love your blog! Being a mortgage broker I of course gravitated to this post :)
Nice piece and I couldn't agree with you more. I think 2011 will be the year to get the best deal, as a home buyer, out of this whole housing melt down. Interest rates of course being a major factor in the overall affordability.
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