Rents have finally started to slow down in South Florida after a year of record growth, but whether the trend continues is up in the air.
Various reports indicate that renters might have a small breather after seeing stark increases in their rents.
The Waller, Weeks and Johnson Rental Index, conducted by researchers at various colleges in Florida, shows that while rents in South Florida have increased by at least 21% in August over the past year, most of those increases happened between last September and February.
Rents overall have increased about 6.8% in the past six months in the tricounty area. In July, rents had grown about 8% in the six months before that.
“It’s suggestive of a slowing in rents,” said Ken H. Johnson, real estate economist with Florida Atlantic University. “It’s a pattern around most of the country.”
Data from RedFin also indicates that rents might be moderating. Researchers there measured asking rents, or the rents that are offered when signing a new lease, and found that they had increased about 10% when compared to the year before in West Palm Beach, Fort Lauderdale and Miami to about $3,027, also noting that they had declined by about 1.3% month to month from July to August.
While it’s normal to see a slight seasonal slowdown in August, as many families are already settled where they need to be for school, the rental market hasn’t picked up after it as usual, noted Bonnie Smetzer, executive vice president of Asset Living, a company that manages rental units all throughout Florida.
“The slowdown I noticed across my entire portfolio and hearing from others is that we started seeing a pullback on new leases. We are seeing that rents that were being increased are being held or even reduced,” she said.
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The larger questions remain if the slowdown in rents will continue. There are signs that it could be the beginning of a more permanent trend, as renters start to moderate, that renters might see more normal increases down the line.
However, factors like rising interest rates, and the ability of developers to bring more supply to the market, could impact where the trend is heading.
“These next 30 to 90 days, we are going to see some interesting outcomes in the rental market,” said Johnson. “It’s fluctuating right now.”
As people flee the devastation left by Hurricane Ian on the west coast, it could cause a slight uptick in rents in South Florida for those who might relocate to the area temporarily.
There’s also the issue of rising interest rates, which have an indirect impact on rents. As mortgage rates rise, there’s less demand for people to own homes as affordability goes down, Johnson said. With everyone needing a place to live, it puts increased demand on rents, which can cause them to go up.
It also tends to impact new development of apartments as developers take out construction loans to build new projects.
“There aren’t enough housing units. For someone who needs a home, even with the Feds’ effort, they’re still going to be spending a lot on rent. Fundamentally people need a place to live, so there’s not much room for demand to fall,” said Daryl Fairweather, with RedFin.