Miami, one of the hottest real estate markets in the U.S., is moving slowly back into home-ownership territory, indicating that buying a home may beat renting, according to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index.
Published quarterly, the index is produced by Eli Beracha and William Hardin, professors at FIU’s Hollo School of Real Estate, and Ken Johnson, professor at Florida Atlantic University. It estimates wealth creation through homeownership and equity appreciation versus renting and reinvesting in more traditional financial assets.
On a national level, several markets are peaking while others are again in a pricing bubble.
In Dallas and Denver property prices are still on the rise but at a slower pace, indicating that the gains will soon come to an end, noted Beracha, co-creator of the index and director of the Hollo School of Real Estate.
Strong economies in both markets have maintained property prices at high levels for a sustained period of time. “Both Dallas and Denver are significantly overheated,” said Ken Johnson, associate dean at FAU’s College of Business.
By contrast, Seattle and Honolulu, like Miami, are moving toward a buyer’s market.
“This does not mean that these markets are exhibiting clear buy signal but rather they appear to be pulling back from the brink as buyers begin to negotiate more aggressively in these areas,” said William G. Hardin, director of FIU’s Jerome Bain Real Estate Institute and associate dean of the Chapman Graduate School of Business.
The index forecasts that many real estate markets across the U.S. will experience pricing events in the near future.
“These events could be as benign as flattening prices and extended marketing times in less overheated cities to significant price declines in the more overheated metros,” Johnson said.
In the third quarter of 2018, 20 of the 23 cities in the BH&J Index moved toward rent territory, implying these markets became slightly more renter friendly in terms of wealth creation.