Florida Atlantic University (FAU) published the latest report on the rental market in the state. It provided interesting information about explosive, but not the healthiest, growth in residential rental rates.
Palm Beach, Broward, and Miami-Dade counties became the leaders of growth. These counties showed an exceptional rise in rental costs and pronounced overvaluation.
The state of Florida is one of the most problematic areas in the US in terms of overvalued market supply. One of the main reasons for this problem is the endless flow of buyers from other states, combined with an extremely depleted Florida housing stock.
Florida University and two other research centers addressed the current status of Florida in the analysis of 107 US rental markets. Calculations also included annual growth.
According to the study, 8 of the top 10 overvalued markets are located in Florida. Only Sierra Vista in Arizona and Knoxville in Tennessee are apparently not part of the state of Florida. Sierra Vista ranked fourth and Knoxville took seventh place in the TOP-10.
Landlords in Fort Myers, a city and county on Florida's west coast, south from Tampa, took the hit. In April 2022, the average monthly rent reached $2,073. This is a 32.38% increase in annual terms, the highest rate in the United States.
In terms of rent premiums on top of the rental prices, the leader is the urban agglomeration of Greater Miami, also known as the Florida Gold Coast. It includes Miami, Palm Beach, Broward, and Miami-Dade counties mentioned above. The overvaluation of premiums is 22.07% in this region.
In Miami, a monthly rent reached $2,846. Although, based on statistical forecasts, the real cost should not have exceeded $2,331.
As expected, the COVID-19 pandemic was one of the main reasons for the explosive growth. Demand for new housing has increased, especially through renting, with the spread of the disease and various quarantine measures, including remote employment.
And at the same time, due to local and international pandemic restrictions, supply chains and production have been severed. It has drastically reduced the ability of real estate developers to construct and commission new residential properties for the market.
Considering the fact that the Miami area has little to no available land plots for new developments, and the continuing rise in prices for building materials, the pace of construction essential for a healthy market is still hard to achieve.
Previously, renting was the only way for people to afford housing. Even this option is now beyond the affordable variant. Therefore, an increase in the number of rental contracts for several people should be expected. The growing number of “roommates” will allow tenants to share and reduce the price burden on their financial condition.
The majority of the markets in Florida, and the US in general, are well above the long-term trends predicted a year earlier. Although some areas experience an easing in growth rates. This is about 11 markets with slightly decreased monthly growth. These regions are the following:
- Augusta, Georgia;
- Youngstown, Ohio;
- New Orleans, Louisiana.