South Florida Rental Prices: Signs of Decrease

Rental prices show signs of decreasing in South Florida, providing potential relief for renters.

Real Estate

South Florida Rental Prices Show Signs of Decrease

By Domingo Rolfson

January 31, 2024

121

The South Florida rental market is beginning to cool, with average rents in the Miami-Metropolitan area experiencing a small dip of 0.11% in December. While this may only equate to $3 savings for renters, it signifies a shift from the previous trend of skyrocketing rental prices.
 
"The news is they actually went down and stopped going up," said Ken H. Johnson, real estate economist at FAU's College of Business. This finding was part of research conducted by experts at Florida Atlantic University, Florida Gulf Coast University, and the University of Alabama.
 
Across the United States, rents are decreasing slightly but steadily, providing some relief to regions like South Florida that have been plagued by a lack of affordable housing options due to rapid grabs for vacant units and renters struggling with rising monthly rates.
 
According to FAU's Waller, Weeks, and Johnson Rental Index, the average rent in Miami-Metro should be around $2,550 based on historical data; however, it currently stands at about $2,700. The year-over-year change shows an increase or decrease rate of approximately 2.4%, which according to Johnson is lower than usual as typically there would be an annual rent appreciation between 3% and 5%.
 
In September last year, for instance, the average rent price was higher, standing at $2,817 when it should have ideally been around $2,578—showing a slight but noticeable difference a few months later in December.
 
A recent report revealed that South Florida’s median yearly rent decreased by nearly 10%. Despite high demand causing rents to be above long-term trends, "renters are finally able to catch a small break after years of astronomical hikes," stated Shelton Weeks from FGCU's Lucas Institute for Real Estate Development & Finance.
 
However, one major issue remains: premiums charged on rentals remain high, with South Florida having the highest premium rate across the nation, standing at about 6.2%. Premiums refer to extra charges tenants pay either due to certain features of the unit or recent renovations. This is a significant issue, as only five other metro areas pay higher premiums.
 
This high premium situation can be considered a home overvaluation where property costs exceed the historical relationship between home prices and incomes, along with factors such as rents and construction costs. "We're still paying a pretty significant premium; that's going to take a little longer to get down," Johnson added.
 
The region’s unaffordability is best measured by its high premium percentage, according to Johnson, who suggests one solution could be more unit construction. Cities like Boise, Idaho, are renting at discounted rates due to an oversupply of units, demonstrating an inverse relation between the number of units available and average rent prices: more units result in less rent, while fewer units lead to higher rents.
 
Another factor influencing the rental market are short-term rentals, which are popular in tourist-centric South Florida but also put strain on the rental market, possibly keeping premiums costly. As the economy slows down, some of these short-term rentals may re-enter the market, helping to continue month-over-month decreases in rental rates.
 
While most renters in South Florida still feel financial strain each month due to rising living costs, there seems to be a light end to the tunnel; the upcoming months might see a further decrease in rental rates, allowing residents to save even just enough for a small cup of coffee with cream.


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