Researchers are urging Florida homebuyers to consider renting while they wait for the state’s overheated market to cool as soaring prices in South Florida hit records in June.
Statewide, they say, homes are overvalued by 21.76%. creating a risk that buyers could get stuck with overpriced homes for significant periods of time until prices eventually ease.
“The across-the-board increase in the premiums paid for housing throughout the state is very worrisome,” Ken H. Johnson, real estate economist and associate dean at Florida Atlantic University’s College of Business, said in a report released Thursday. “Trees do not grow to the sky, and neither do home prices.
“We’re nowhere near where we were at the peak of the last housing cycle, but we do need to be careful. Walking away from an obviously overvalued home may be the best thing buyers can do in this kind of market.”
The report found home prices in the Tampa area were the most inflated in the state, selling in June for a 32% premium, up from 28.53% in May. In South Florida, prices were 16.89% above their historical norms, with the Orlando area at 21.19%.
Even though monthly rents for apartments, condos and single-family homes are rising as well, they are not increasing at the pace of the home-buying market, said Eli Beracha of Florida International University’s Hollo School of Real Estate in Miami,
He said people searching for a home are better off renting and investing the money they would have spent on home ownership elsewhere.
“Our research on buy vs. rent indicates that, on average right now, renting and reinvesting is a particularly good wealth creation strategy,” Beracha said. “More people who rent and reinvest would help alleviate current pricing pressure, which is a good thing.”
In conducting their joint monthly analysis, the two professors review more than 25 years of home prices from Zillow, the national online real estate service. The numbers include single-family homes, townhomes, condominiums and co-ops.