Rents are not likely to drastically rise in the near future as the South Florida rental market is starting a gradual cooldown.
One sign of that: The average rent in the Miami-metropolitan area, which accounts for Miami-Dade, Broward and Palm Beach counties, took a 0.11% dip in December.
While that may only amount to a whopping $3 in savings (perhaps enough to buy a coffee), it’s a change from rental prices skyrocketing.
“The news is they actually went down and stopped going up,” said Ken H. Johnson, real estate economist at FAU’s College of Business.
The slight drop was among the key takeaways from research by real estate experts at Florida Atlantic University, Florida Gulf Coast University and the University of Alabama.
Here’s a look at what to expect.
The silver linings in South Florida rent
Rents continue to decrease across the United States, creating a feeble but still growing dent in the affordable housing crises in various regions, not excluding South Florida, long marred by fast-grabs for any vacant units and house-poor renters struggling to keep up with climbing monthly rates.
According to FAU’s Waller, Weeks and Johnson , the average rent in the Miami-metro area is about $2,700, but it should hover around $2,550, which is deduced by looking at the history of rents.
The current year-over-year change, which is by how much rents annually increase or decrease, is about 2.4%, which is actually lower than normal, Johnson said.
“Our rents are really slowing,” he said. “As a matter of fact, typically you see 3% to 5% per year average rent appreciation.”
For extra context, in September, the average rent price was $2,817, but it should have been $2,578, lending to the marginal but still noticeable difference a few months later in December.
And, according to a December Rent Research market report, South Florida’s median rent year-over-year change, which is different than average rent change, dropped by nearly 10%.
“Demand is still strong in Florida and rents are still higher than their long-term trends, though renters are finally able to catch a small break after years of astronomical rent hikes,” said Shelton Weeks, the FGCU director of the Lucas Institute for Real Estate Development & Finance, in a statement.
Still facing hardships
One big problem is still pricey premiums. At about 6.2%, South Florida has one of the highest premiums in the nation.
A premium is essentially an extra chunk of money tenants succumb to either because of certain features about the unit or the fact it may have been recently renovated.
“There’s only five metros in the country that are paying a higher premium than we are,” Johnson said. “While our rents are slowing, we still have an affordability problem.”
This phenomenon may be understood better as home overvaluation, which is when the cost for a property is higher than whatever the historical relationship is between home prices and incomes along with factors such as rents and construction costs.
“We’re still paying a pretty significant premium, and that’s going to take a little longer to get down,” Johnson said. “That is still the killer where we are paying very high prices relative to the trend.”
South Florida’s high premium percentage is one of the best measures of the region’s raging unaffordability, Johnson said, and one avenue to alleviate it relies on the construction of more units.
The rare cities in the U.S. renting at a discounted rate — Boise, Idaho, for example — have an oversupply of units, demonstrating an inverse relationship between the number of units and average rent prices: typically, the more units available, the less rent will be while fewer available units available means rent will probably be higher.
Also thrown into the mix are short-term rentals, which are units rented out for as little as a few days to several weeks. These are popular in South Florida’s tourist-centric ecosystem, but they place pressure on the rental market and may be keeping premiums costly.
“I look across the street, and there’s four different cars at the house across the street from me every other night,” Johnson said. “It’s being short-term rented. So that house has come out of inventory, and so that hurts us. That keeps us at that premium level.”
But as the economy continues to slow, Johnson said he believes some of those short-term rentals may enter back into the market, which may continue to help the month-over-month decreases.
So while most South Florida renters likely still feel squeezed each month, the horizon isn’t totally hazy; and who knows, maybe in January the decrease will be $5 — enough for a small cup of coffee with cream.
