The rental housing market in Florida is among the most overvalued in the country, and has among the fastest-rising prices, according to a new study of rental trends.
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 renters was found in the Miami market, which in the study includes Miami-Dade, Broward and Palm Beach counties. The study found it was overvalued by 22.07%. The average monthly rent in the South Florida region rose to $2,846, even though historical leasing figures indicate the average should be only $2,331.
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The largest year-over-year increase in rental costs was in the Fort Myers area. The average rent there is $2,073, up 32.38% from a year ago. The nine other Florida markets in the study also had year-over-year rental price increases of more than 20%, with all ranking in the top 15 among the 107 markets in that metric.
“A lot of our Florida markets are way overpriced compared to the rest of the country,” said Ken H. Johnson, a real estate economist at the Florida Atlantic University College of Business, who is a co-author of the study.
Although there has been past volatility in the single-family home market, “I’ve never seen anything like this” in the rental market, said Johnson, who has followed the housing industry for nearly four decades. “It was shocking to me. I’ve never seen rents deviate this much.”
He blames that in part on the heavy influx of people moving into Florida, including from states where housing prices are higher than Florida’s, coupled with a shortage of housing inventory.
“We cannot build them fast enough” to meet the demand, Johnson said.
Compounding the problem of overvalued rentals are supply-chain issues and rising material costs that have hampered builders from adding supply. In some landlocked areas, such as Miami, finding available property to develop also is a major challenge, the researchers noted.
Furthermore, Johnson said that during the COVID-19 pandemic in 2020, the federal government placed a national moratorium on rental evictions, resulting in a stall in rental rates.
“During 2020, in fact, rentals in most of the country were undervalued because they were leasing below the long-term trend,” Johnson said in his analysis of the U.S. housing market.
“But the expiration of the moratorium, combined with strong demand for rentals, particularly in Florida, sent rental rates soaring. Until more rental units are built, landlords will continue to raise rates, pricing out many middle-class consumers who previously turned to renting because they couldn’t afford to buy.”
These are the top 15 U.S. markets for housing overvalue, the percentage of how high it is over where the average rent should be, along with the average current rent:
- Miami-Fort Lauderdale-West Palm Beach | 22.07% | $2,846
- Sierra Vista, Arizona | 21.87% | $1,283
- North Port-Sarasota-Bradenton | 18.68% | $2,331
- Fort Myers | 18.09% | $2,073
- Tampa | 16.91% | $2,055
- Knoxville, Tennessee | 16.32% | $1,601
- Killeen, Texas | 16.15% | $1,397
- Port St. Lucie | 16.01% | $2,266
- Lakeland | 15.17% | $1,808
- Daytona Beach | 14.15% | $1,788
- Phoenix, Arizona | 13.89% | $1,911
- Jacksonville | 13.49% | $1,748
- Orlando | 13.48% | $1,999
- Melbourne | 13.04% | $1,881
- Las Vegas | 13.00% | $1,851
How the study used national rent data, trends
The study used leasing data for a range of different types of rentals dating back to 2014 from Zillow’s Observed Rent Index to model the rental trend for each metropolitan area.
The data shows where rents should be based on a history of rents, compared with actual, current rents. This premium or discount is defined as the percentage difference between statistically modeled prices and actual rental prices. The higher the premium, the more overvalued a market is.
The only market of the 107 studied with a discount was San Francisco, where the study found the actual average rent of $3,157 a month was 0.48% below where it was expected to be. The caveat, though, is that San Francisco has the second-highest average rent in the country, behind only San Jose, Calif., at $3,199 a month.
The average monthly rent nationwide is $1,927, which is 9.11% above the expected rent.
The report – called the Waller, Weeks and Johnson Rental Index – is co-produced by the FAU Real Estate Initiative, Florida Gulf Coast University’s Lucas Institute for Real Estate Development & Finance and the Alabama Center for Real Estate at the University of Alabama.
“The way out of this is to add more rental units to the marketplace,” said co-author Bennie Waller of the Alabama Center. “But it’s just not realistic to expect a bunch of new projects in the near term, given the supply-chain problems and the often slow pace of government approvals facing developers before they can put a shovel in the ground.”
All 107 markets studied had year-over-year increases in rental prices. Eleven of the 107 markets posted rental price decreases in the last month, but none of them were in Florida.
“Depending on the market, some rents may be stabilizing, but they’re still much higher than they were a year or two ago,” said report co-author Shelton Weeks of Florida Gulf Coast’s Lucas Institute. “It’s incredibly painful for middle-class budgets.”
Johnson – who also is associate dean of graduate programs with the College of Business at FAU – said, for some people, renting was the only way they could afford to live in Florida, but that’s now becoming difficult, too.
Johnson said he expects rising rental prices will cause changes in rental housing trends, including:
- Three generations of families living in the same rental units.
- Extended families that include aunts, uncles, nieces and nephews moving into a household.
- College students taking on additional roommates.
- “Unusual roommate situations,” such as middle-aged people who are not in a relationship living together.
- Greater use of manufactured homes as rentals.
“I think you’ll see more renters take on roommates and cut back on eating out because it’s either that or they won’t be able to pay the rent,” Johnson said.
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