South Florida has always experienced a high level of in-bound migration from other states. However, since the beginning of the pandemic, we have seen a record level of Americans relocating to The Sunshine State. Although many of these transplants have been buying homes in paradise, many more have have decided to rent a home to study the market prior to purchasing a home. As a result, the demand for both home purchases and rentals has reached record levels. Needless to say, home purchase and home rental prices have skyrocketed due to increased demand combined with tight inventory. So what can we expect from South Florida rental prices moving forward? We discuss below.
The future of South Florida rental prices
With the Federal Reserve raising interest rates at an aggressive pace to combat 40-year high inflation, we have seen mortgage interest rates rise from 3% at the beginning of the year to roughly 6% now. Needless to say, this has priced many would-be home buyers out of the market. As a result, these would-be home buyers are remaining or re-entering the the rental market. This is causing even higher demand for South Florida rental housing and thus raising prices. For perspective, rents traditionally rise 2% to 3% per year historically. However, we have seen South Florida rental prices rise year-over-year in some markets by an astounding 30% or more in some markets. For example, Fort Myers, FL had the nation’s largest year-over-year rent increase in May at 33.10%, followed by Miami at 31.04%. The national average for year-over-year rental price increases was 15.87%.
Most overvalued rental markets
The Waller Weeks & Johnson Rental Index, a collaboration started this year by Florida Atlantic University, The University of Alabama and Florida Gulf Coast University, found that renters pay significantly more than expected based on historical trends in individual markets. According to these findings, Miami, FL was the nation’s most overvalued rental market for the third consecutive month in May, with renters paying a 22.7% premium to live in The Magic City. In fact, Florida cities comprised 6 out of the top 10 most overvalued rental markets in the nation. They were as follows:
- #1. Miami, FL (+22.7%)
- #2. Fort Myers, FL (+20.41%)
- #4. Bradenton/Sarasota, FL (+17.86%)
- #5. Tampa, FL (+17.52%)
- #7. Port Saint Lucie, FL (+15.89%)
- #9. Lakeland, FL (+15.36%)
Unfortunately for renters, South Florida rental prices are expected to remain high and possibly edge higher in some markets for the foreseeable future. Factors such as continued in-bound migration, rising interest rates slowing down the home purchase market, supply-chain issues impacting construction of new rental units, and a persistent construction labor shortage are just a few of the reasons these prices will remain elevated. As a result, South Florida renters are encouraged to cut back on discretionary spending in order to make ends meet. As for real estate investors, the continued demand for South Florida rental housing may offer an opportunity to consider adding units to real estate portfolios. Are you looking to buy, sell, or rent South Florida real estate? Contact Natasha at Live South Florida Realty, Inc. today!
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our trusted “Florida Home Search” app is available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!