Buy v. Rent — Miami and Coral Gables Real Estate

posted on February 1st, 2010 filed under: Real Estate News

Historically, the cost of owning a home in Miami and Coral Gables has been a bit more than the cost of renting.  That’s normal.  But during the real-estate bubble, the cost of buying versus renting grew so disproportionate that ownership became downright irrational.

How about now?  Have real-estate prices come down enough in Miami and Coral Gables to make buying sensible again?

One quick, unscientific way to check is to look in the Sunday paper for homes that are both for sale and for rent.  The cost of ownership is about 10% of the purchase price per year.  The cost of rent is 12 times the monthly rent.  Compare the two.  The cost of owning is normally a bit more.  During the bubble it became double.

What’s available now?

  • Buy $165k —- Rent $14.5k/yr
  • Buy $885k or Rent $50k
  • Buy $1M —- Rent $48k/yr
  • Buy $1.5M —- Rent $83k/yr
  • Buy $2.9M —- Rent $84k/yr
  • Buy $9M —- Rent $420k/yr

Ownership becomes increasingly irrational as prices rise.  That’s actually normal.  At the low end, income limitations impose fiscal restraint.  At the high end, people have enough resources to afford a little irrationality.

The trouble lies in the million-dollar range, where buyers are likely to earn upper-middle-class incomes and probably should not make spending decisions like Jay Gatsby.

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posted by // This entry was posted on Monday, February 1st, 2010 at 11:18 am and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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