Is It Better to Rent or Buy in Tampa in 2016?
By Jennifer Riner
Last year, Zillow ranked Tampa the seventh best buyer’s market in the nation, with a median home value of $149,500. Today, home values in Tampa are at $156,000, a 10.7 percent increase in just one year. Zillow predicts home values will rise another 2.8 percent throughout the next year, further solidifying Tampa’s hold as an up-and-coming real estate investment opportunity.
There’s little doubt that buying a home in Tampa could be a profitable option for those who can afford it, especially with interest rates entering 3-year lows. But, is it currently better to rent or buy in Tampa?
What does it cost to rent in Tampa?
If you’re choosing to relocate to Tampa as a newcomer, you might consider renting before owning so you have more freedom to move around before locking down a neighborhood. Unlike renting, buying restricts you from having the flexibility to explore new areas every 12 months or so.
Currently, apartments in Tampa cost a median of $1,300 per month. The Tampa metro area, spanning beyond the city limits, is $1,311 per month. Compared to the U.S. as a whole, Tampa’s rental rates are slightly less expensive. The national median rent is $1,388.
Can you afford to buy in Tampa?
Assuming you’re looking to buy in Tampa, first figure out if you can afford the median-priced home. If you put 20 percent down on the median home in Tampa ($156,000), you’re looking at a $31,200 down payment, assuming a 30-year fixed rate with a 3.488 interest rate.
Your mortgage payment would be $782 per month, including principal, interest, insurance and taxes.
Clearly, $782 is far cheaper than the median rent in Tampa of $1,300 per month. But, bear in mind you’ll need $31,200 up front to benefit from this low payment. And, you’ll need a good credit score in order to receive the lowest interest rate. Plus, HOA fees are not included, and you have to factor in other expenses such as property maintenance. When renting, landlords cover repair costs (though don’t trick yourself – you are paying for these in your rent), and you’ll be responsible for such when you decide to own.
If you don’t have the money saved up for a down payment, you can still take advantage of the benefits and savings of owning a home in Tampa. Highland Homes, a Tampa home builder, assists home buyers with the upfront costs of purchasing by offering low down payment finance options through their preferred lenders. By utilizing no money down loan programs and down payment assistance programs, qualified buyers may purchase with Highland Homes with just $99 down. For qualified home buyers in Tampa, this makes the upfront cost of owning significantly cheaper than upfront rental costs, as typically one is required to pay first month’s rent plus a security deposit which is typically one month’s rent depending on individual landlord policies.
The lesser down payment does mean you will have a higher mortgage amount, and thus a higher monthly payment than the $782 quoted in the scenario above – According to Highland Homes, you will be looking at just under $1,000 per month including principal, interest, insurance, taxes, and the USDA Annual Fee included in this type of loan – Still, cheaper than renting in Tampa.
Buy vs. Rent
Using the breakeven horizon, hopeful homeowners can calculate how long it would take for buying to become less expensive than renting. The breakeven horizon estimates the time it takes for the accumulated costs of renting to exceed the costs of purchasing the same home, by analyzing upfront costs, monthly payments, and home value appreciation. Assuming you are putting 20% down, the breakeven horizon in Tampa is one of the lowest of all metros in the U.S. at 1.9 years.
Overall, if you do choose to rent in Tampa first – whether it’s because you want to explore your new city’s neighborhoods or save for a down payment – it’s best to lease only if you’re staying in your home less than 1.9 years. Otherwise, your money is better allocated toward purchasing the same home.
As one of the most trusted names in real estate, Zillow has a nationwide team of experts that provide the latest research and data about the housing market. Visit the Zillow Blog for up-to-date research, mortgage advice, home buying tips, trends and more.
With all the advantages of owning a home in Tampa, Highland Homes is excited to build quality new homes priced from the mid $100’s to $300’s in communities throughout the Tampa area. In addition to affordable prices and quality construction, buyers will have the opportunity to personalize their homes through Highland Homes’ Personal Selection Studio. To explore purchasing a new home in Tampa Bay, visit https://www.highlandhomes.org/tampa.