In addition to a wave of new Fla. residents, many buyers find themselves “forced to rent,” many month-to-month, because they haven’t successfully found a home to buy.
FORT LAUDERDALE, Fla. – Unless you can drop a pile of cash on the table, you may get squeezed into renting in South Florida’s crazy homebuying market.
Home shoppers who need a mortgage are finding it harder and harder to land a house when competing against buyers – many from out of state – who are offering huge amounts of cash. That’s driving many people to rent, which only drives rents even higher.
Average rents have increased almost 4% in South Florida in the past year, double the increase the year before. Rents could rise an additional 2.5% to 3.5% in the coming year, according to Ken H. Johnson, a real estate economist at Florida Atlantic University.
Kristin Mahon, 35, and husband David, 43, face the typical predicament. They have searched without luck for a home in the Pompano Beach, Margate or Coconut Creek areas. They’ve put in offers on four houses, up to $30,000 over the asking price, but they’ve lost out to multiple cash offers on the same houses.
For now they’re renting a condo at Palm Aire, a condominium complex in Pompano Beach, on a month-to-month basis as they continue to search for a home.
“We were kind of forced into it,” Kristiana Mahon said. Their plan is to reevaluate if they haven’t bought a home within six months.
Developers are building new apartments and condos as fast as they can to capitalize on the situation. About 8,500 were built in South Florida in 2019 and 2020.
Many are out of reach for the typical renter. The average rent for complexes with more than 50 units in Lake Worth increased by 5.4% over the past year to $1,553. Rent in Boca Raton increased by 7.6% to $2,177, and rent in Fort Lauderdale increased by 3.1% to $2,059, according to data from RentCafe.com, a nationwide apartment listing service.
Economists say rising rents result from a confluence of factors: the shortage of houses to buy, the wave of new Florida residents and the abundance of cash purchases for homes.
Cash sales have been rising in all three counties in South Florida, according to data from the Broward, Palm Beaches & St. Lucie Realtors.
“At the margin, given limited inventory, potential buyers making offers involving financing will be pushed into alternative living arrangements – renting being a primary alternative choice,” said Johnson, the economist at FAU.
That might be an apartment, a townhome, a condo, a single-family home or even an AirBnB, said broker Kaley Tuning of Native Realty in Fort Lauderdale.
Some first-time homebuyers, without the cash to buy a house in full, have turned to short-term renting or even yearly leases as they wait for the market to cool down.
“If they are wanting to purchase a home, they would be willing to lose a deposit to make sure they secure a place,” Tuning said.
Apartment complexes are seeing more people whom they call “transitional renters” – people who have sold their homes and want to rent until they can buy a new place, said Johnny De La Espriella, senior vice president of RKW Residential, which has 20 apartment communities in Miami-Dade, Broward and Palm Beach counties.
Irene Steslow, a real estate adviser for Compass Florida LLC in Fort Lauderdale, has a client who is looking to buy a home with an offer that is contingent on selling his current home. Since his offer won’t be as attractive as cash, Steslow suggested he rent.
“We are having trouble competing” against cash, she said.
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