Miami Renters are in Dire Straits
On June 1st, Governor Ron DeSantis announced that renters would have another thirty days before the state of Florida lifted its moratorium on evictions. Landlords are expected to flood the courts with filings once this grace period ends, leaving many people’s living situations uncertain.
This is exactly why Miami renters should consider buying a home. When looking towards the future, renters know what’s coming: it’s going to be cramped, expensive, and not nearly worth what they’ll be paying.
That, and the fact that 53% of Miami-Dade County residents are immigrants, means that there may be many people living in other cities that are scrambling to get back to their family home due to job loss, not being able to pay rent, and the fear of growing coronavirus cases by staying in potentially large hot spots.
Since Miami-Dade County is home to most immigrants, they and/or their children may not have had the same amount of time to accrue wealth as families that have been living in the United States for several generations.
You should care if more people come to South Florida, because as crowded as we are, we may actually see more people competing in the rental market in the next couple of years even more than now. Let’s look at the numbers.
Miami Housing Costs: Owning vs. Renting
According to the US Census, there are about 2.7 million people within Miami-Dade County and about 1 million housing units. Which means that chances are that you’re unlikely to be living alone. Of these housing units, 51.6% are owned.
These homeowners pay an average of $1,765 per month—with mortgage payments and other living expenses included. Renters, on the other hand, pay considerably more.
The average monthly rent in Miami is $1257. Renters also have to deal with other expenses that can rack up an extra $608 dollars per month. This means that the average renter in Miami is paying about $100 more than homeowners, which means you’re not only missing out on a future home investment opportunity, you’re also letting the equivalent of a hefty Amazon gift card slip through your fingers.
But as we had mentioned, 53% of Miami-Dade County residents are immigrants. This means that either you (or your parents or grandparents) may have had to come to the United States from a different country. Naturally, rebuilding takes time, and in some ways, it’s not surprising that many people in Miami aren’t yet homeowners—they simply haven’t had the time to accrue enough wealth.
But here’s the thing, if you’re able to overpay for rent, then that means you can easily take on a home. We know what you’re thinking: why would I buy a home rather than rent if I’m not ready to settle down just yet? The better question you should be asking is: how can buying a home save me financially within the next couple of years?
Playing it Smart During a Recession
Let’s not mince words, COVID-19 put us straight into a recession, no ifs, and, or buts about it. Our low unemployment rate in March (3.5%) sky-rocketed in April to 14.7%—a whopping 11.2% increase. While May saw a nice addition of 1.4 million jobs added back to the economy, roughly 1 in 8 people are still currently unemployed. And because of that, we’ll be in a sluggish economy for some time.
However, slow markets always offer opportunities to the savvy entrepreneur or thrifty money manager. Right now, it’s not so much about finding more income (which is unrealistic for many), but how to work with what you’ve got and turned it to your advantage.
If you’re a renter waiting for the other shoe to drop as your landlord plots your eviction, here is a list of renter assistance resources. Although we’re now facing a sobering reality, taking on a mortgage might save you from the current dangers of renting.
The Right Mortgage Can Be an Asset During a Recession
When people think of mortgages, they’re normally thinking about 30-year fixed loans. These are the ones you take on and pay off through the decades. Many people think that this is the end all be all to home-owning, but it’s far from true. Here is a list of loan types that you might find beneficial if you’re looking to become a homeowner during the recession to weather it better:
ARM Loans: Adjustable Rate Mortgages, otherwise known as ARMs, are perfect for homebuyers who know that they’ll be moving or selling their home within the next five to ten years.
Cash-out Refinance Loans: If you are already a homeowner, you may have lived in your home for several years, maybe even renovated a bathroom or two. This means that you’re potentially sitting on top of thousands of dollars in equity. Equity is the rise in the value of your home since you first bought it, and in cases like these, you could ask your mortgage broker for a cash-out refinance.
There are other loans similar to these that are only for US veterans, as well as USDA rural housing loans for people who would be willing to live in more remote locations (Homestead, FL, for example). What we’re trying to say is that Miami renters should consider buying a home, because a mortgage needs to accommodate the client, not the other way around.
Why Miami Renters Should Buy a Home Now
In this recession, the only thing that’s truly doing well is the housing market. There won’t be another crash like in 2008, and in fact, mortgage interest rates are incredibly low right now, starting at under 3%. That means that buying has never been cheaper, so if you do have a nest egg and want to make it last, a mortgage payment that’s lower than your current rent might be something to consider as we find our way out of this messy situation.
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