BOCA RATON, Fla. (By Dale King, Realty News Report) — December 2022 rents fell in 71 of the nation’s 100 largest metropolitan areas, according to the Waller Weeks and Johnson Rental Index, a collaboration by researchers from Florida Atlantic University, the University of Alabama and Florida Gulf Coast University.
That, the professors say, indicates the U.S. rental crisis is easing, even though markets in Florida remain overvalued and unaffordable for many consumers.
While the rent crisis is slowing, the university researchers said they are concerned about affordability.
“It is one thing for rents to slow, but another for rents to decline,” said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business. “I don’t think we will see rents returning to 2019 levels anywhere in the country. So, affordability will be an issue until incomes rise closer to monthly rents.”
While numerous, the decreases were not significant, said university analysts. Rents in Syracuse, N.Y., fell the most, dropping 1.95 percent from November to December. Scranton, Penn., recorded the second-largest rent drop at 1.72 percent followed by Winston-Salem, N.C., at 1.41 percent.
The report from the five Texas metros listed on the researchers’ index was mixed. Three regions went down, two went up, but none of the tallies even hit 1 percent.
Figures compiled in the university report showed that rents in Austin dropped .33 percent, rental prices for Dallas dropped .31 percent and McAllen’s average rental cost went down a scant .06 percent.
Areas where rents increased were Houston, up .31 percent and El Paso, the high roller at .89 percent.
“Falling rents is the result of the supply of units beginning to catch up with the demand for rentals,” said Johnson.
Florida remains the thorn in the side of moderating rents, the professors said. The most overpriced rental market in the nation in December was Cape Coral-Fort Myers, where renters paid 17.85 percent more than they should based on a history of rents. The market’s average rent in December was $2,251.39, up 1.25 percent from November.
North Port-Bradenton is the next most overvalued market with a 14.72 percent premium, followed by Miami at 14.66 percent.
There’s a reason for the overvaluation. Hurricane Ian devastated Cape Coral-Fort Myers in late September, and the area’s rental market is still trying to recover, said Shelton Weeks, Ph.D., of Florida Gulf Coast University’s Lucas Institute for Real Estate Development & Finance.
“Many units were destroyed in the storm, while others were severely damaged,” Weeks said. “The market already had a limited supply of units, so it is not shocking to see rents in December jump in Cape Coral. We still have quite a ways to go before the rental market in Southwest Florida normalizes.”
Markets clustered in California are some of the best for renters. Stockton, San Francisco, Modesto, Sacramento and San Jose all rank among the nation’s smallest rental premiums. Minneapolis had the smallest December premium at .19 percent. The U.S. average premium is 6.44 percent.
“The national trend remains encouraging, but it is clear that rent relief is happening much slower in the Sun Belt states,” said Bennie Waller, Ph.D., of the University of Alabama’s Culverhouse College of Business.
The index relies on leasing data from Zillow’s Observed Rental Index to determine existing rents and statistically model historical trends from 2014. It covers the entire rental stock of homes and apartments.
In Houston, the multifamily market told a different story. “The average monthly rent for multifamily units increased 5.1 percent annually from $1,189 per month in Q4 2021 to $1,250 per month in Q4 2022,” Colliers said in a recent report on Houston’s multifamily market. “There are more than 20,700 units under construction and another 33,666 units are proposed.”
Feb. 15, 2023 Realty News Report Copyright 2023
Photo by Ralph Bivins Realty News Report Copyright 2023
THE RALPH BIVINS PROJECT PODCAST
File: Nation’s Residential Rents Fall