National rent survey finds Florida markets among the most overvalued

Florida’s rental housing market is one of the most overvalued in the country and prices are rising among the fastest, according to a new rental trends study.

The study of 107 U.S. rental markets, released June 6 and using data from April, found that 10 of the 14 most overvalued rental markets in the country are in Florida. The study included 10 Florida markets, and all 10 are overvalued by more than 13%.

The largest “premium” paid by tenants was found in the Miami market, which in the study includes Miami-Dade, Broward and Palm Beach counties. The study found that it was overvalued by 22.07%. The average monthly rent in the South Florida area has risen to $2,846, although historical rental numbers indicate the average should only be $2,331.

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The largest year-over-year increase in rental costs occurred in the Fort Myers area. The average rent there is $2,073, up 32.38% from a year ago. The other nine Florida markets in the study also saw year-over-year rental price increases of more than 20%, all ranking in the top 15 out of 107 markets by this metric.

“A lot of our Florida markets are way overpriced compared to the rest of the country,” said Ken H. Johnson, real estate economist at Florida Atlantic University College of Business, co-author of the study.

While there’s been past volatility in the single-family home market, “I’ve never seen anything like it” in the rental market, said Johnson, who has tracked the housing industry for nearly four decades. “It was shocking to me. I have never seen rents deviate so much.

He attributes this in part to the large influx of people moving to Florida, including from states with higher housing prices than Florida, coupled with a housing shortage.

“We can’t build them fast enough” to keep up with demand, Johnson said.

The problem of overvalued rents is compounded by supply chain issues and rising material costs that have prevented builders from adding supply. In some landlocked areas, such as Miami, finding properties available for development is also a major challenge, the researchers noted.

Additionally, Johnson said that during the COVID-19 pandemic in 2020, the federal government imposed a nationwide moratorium on rental evictions, which caused rental rates to stagnate.

“In 2020, in fact, rentals in most of the country were undervalued because they were renting below the long-term trend,” Johnson said in his analysis of the U.S. real estate market.

“But the expiration of the moratorium, combined with strong demand for rentals, particularly in Florida, has driven rental rates up. Until more rental units are built, landlords will continue to raise rates. , removing many middle-class consumers who previously turned to rentals because they couldn’t afford to buy.

Here are the top 15 U.S. markets for overvalued housing, the percentage of its level relative to the average rent, and the average current rent:

  1. Miami-Fort Lauderdale-West Palm Beach | 22.07% | $2,846
  2. Sierra Vista, AZ | 21.87% | $1,283
  3. North Port-Sarasota-Bradenton | 18.68% | $2,331
  4. Fort Myers | 18.09% | $2,073
  5. Tampa | 16.91% | $2,055
  6. Knoxville, TN | 16.32% | $1,601
  7. Killeen, Texas | 16.15% | $1,397
  8. Port Saint Lucie | 16.01% | $2,266
  9. Land of lakes | 15.17% | $1,808
  10. Daytona Beach | 14.15% | $1,788
  11. Phoenix, AZ | 13.89% | $1,911
  12. Jacksonville | 13.49% | $1,748
  13. Orlando | 13.48% | $1,999
  14. melbourne | 13.04% | $1,881
  15. Vegas | 13.00% | $1,851

How the study used national data on rents, trends

The study used rental data for a range of different rental types dating back to 2014 from Zillow’s Observed Rent Index to model the trend in rents for each metropolitan area.

The data shows where rents should be based on a history of rents, compared to actual and current rents. This premium or discount is defined as the percentage difference between the statistically modeled prices and the actual rental prices. The higher the premium, the more overvalued a market.

The only market of the 107 surveyed with a discount was San Francisco, where the survey found the actual average rent of $3,157 per month to be 0.48% lower than expected. The caveat, however, is that San Francisco has the second-highest average rent in the country, behind only San Jose, Calif., at $3,199 per month.

The national average monthly rent is $1,927, or 9.11% more than the expected rent.

The report – called the Waller, Weeks and Johnson Rental Index – is co-produced by the FAU Real Estate Initiative, the Lucas Institute for Real Estate Development & Finance at Florida Gulf Coast University and the Alabama Center for Real Estate at the University of Alabama.

“The solution is to add more rental units to the market,” said co-author Bennie Waller of the Alabama Center. “But it’s just not realistic to expect a bunch of new projects in the short term, given the supply chain issues and the often slow pace of government approvals that developers face before they get started. cannot put a shovel in the ground.”

All 107 markets surveyed recorded year-over-year rental price increases. Eleven of 107 markets posted rental price declines in the past month, but none of them were in Florida.

“Depending on the market, some rents may stabilize, but they’re still much higher than they were a year or two ago,” said report co-author Shelton Weeks of Florida Gulf’s Lucas Institute. Coast. “It’s incredibly painful for middle-class budgets.”

Johnson – who is also associate dean of graduate programs at FAU’s College of Business – said that for some people, renting is the only way to afford to live in Florida, but it’s also getting tough.

Johnson said he expects rising rental prices to drive changes in rental housing trends, including:

  • Three generations of families living in the same rental units.
  • Extended families which include aunts, uncles, nieces and nephews moving into a household.
  • College students take additional roommates.
  • “Unusual roommate situations,” such as middle-aged people who are not in a relationship and live together.
  • Increased use of manufactured homes as rentals.

“I think you’ll see more tenants taking on roommates and cutting back on eating out because it’s either that or they won’t be able to pay the rent,” Johnson said.

Dave Berman is economics editor at FLORIDA TODAY. Contact Berman at [email protected]. Twitter: @bydaveberman.

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