Study: Rent Increases Slowing as More Supply Hits the Market
More of the largest metropolitan areas posted monthly declines in rent, further proof that the rental crisis is easing across the nation, according to researchers at Florida Atlantic University and two other schools.
In October, 68 housing markets had smaller average rental rates, up from 38 in September. Springfield, Massachusetts; Austin, Texas; Seattle and New York are among the metros where rents are falling. The U.S. average rental rate was $2,040, down 0.9 percent from September.
“It seems that an increase in supply helped relieve the pricing pressure on rental units around the country – and that’s exactly what had to happen,” said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business. “The added supply appears to have come from delivery of units under construction, an increase in unit density and the conversion of many Airbnb-type units to long-term rentals”
Despite the slowdown, rental rates remain elevated in some markets, particularly Florida. Cape Coral-Fort Myers led the U.S. in both the largest year-over-year rental increase (17.16 percent) and the largest premium (17.37 percent). A premium is the amount above the long-term leasing trend that renters must pay. Rents typically increase only 3 to 5 percent a year.
The full rankings can be found here.
Most Florida rents are declining month over month, but Cape Coral-Fort Myers posted a 1.76 percent increase in October.
“The significant rise in Cape Coral-Fort Myers is very disheartening, though not surprising,” said Shelton Weeks, Ph.D., of Florida Gulf Coast University’s Lucas Institute for Real Estate Development & Finance. “The monthly index report is highlighting the ongoing cost of Hurricane Ian. There are signs of a recovery, but affordable housing should remain an issue in this market for months to come.”
Las Vegas posted the nation’s smallest annual rental increase at 1.58 percent, while Minneapolis had the smallest premium at 1.03 percent.
Bennie Waller, Ph.D., of The University of Alabama’s Culverhouse College of Business, said the national data reveals that much of the large rental increases are coming from six and 12 months ago.
“Within the past month or two, rents are slowing and returning to a more normal year-over-year trend,” he said. “It’s clear that much of the country is starting to shake off these large increases, which have been so devastating to consumer budgets.”
The researchers use leasing data from Zillow’s Observed Rental Index to determine existing rents and statistically model historical trends from 2014. The Waller Weeks & Johnson Rental Index covers the entire stock of homes and apartments.