Florida rents are the most ‘overvalued’ in the country, but could drop, expert says – Orlando Sentinel

Florida rents have skyrocketed over the past year, but an expert says they could do something even more shocking in the near future: come down.

“There could be a little backup in the rent,” said Ken H. Johnson, professor of real estate economics at Florida Atlantic University.

Johnson co-authored a new study that found Florida had the most overvalued rental markets in the nation, meaning the biggest disparity between actual rent and what the market has historically commanded in a particular community.

“The best way to predict price is last price,” Johnson said.

According to the study, Florida had the top five cities and 10 of the top 25 metros for overvalued rents in the nation. Miami took the top spot with an average rent of $2,832 per month, a 21.75% premium over its expected price.

The other four in the top five were Fort Myers with 18.16%, Tampa with 17.08%, Sarasota with 16.98% and Port St. Lucie with 15.61%.

Orlando came in 16th with an average rent of $1,951, a premium of 13.06%. Orlando’s rent is up 24.74% year over year, according to the FAU.

Other overrated cities in Florida include No. 8 Lakeland, No. 12 Daytona Beach, No. 13 Jacksonville and No. 19 Melbourne.

Overvaluation means the rent is higher than what the local economy was previously supporting. In a city like Orlando with many low-wage service jobs, overvaluation creates significant, long-term housing affordability issues.

Johnson says high rents are unlikely to push residents to other states. What usually happens is that workers move away from their metropolitan area, which increases their commute times, a major concern if gas prices remain high.

Johnson points to three main drivers of the problem. The first is the number of second homes for people who live out of state, which eliminates supply homes for residents.

Similarly, another cause is the number of accommodations converted into tourist accommodations for peer-to-peer hotel sites such as Airbnb and VRBO.

Finally, Johnson and his co-authors also point to an influx of residents during the pandemic who were drawn to Florida’s lax weather and policies.

“A lot of people, rightly or wrongly, thought if they had to work from home, why do it in Chicago when they could do it in Florida,” Johnson said.

The study authors believe that some of these transplants will return to their home countries as offices reopen and life returns to normal. It’s the latter reason that gives Johnson hope that rents could come down, even moderately, though he notes the affordability crisis in the state will likely last for years.

“You’re not going to wake up one day and see prices for 2020 or even early 2021, but it could come down a bit,” Johnson said.

Regardless of the pandemic, Florida is expected to experience continued growth at a nearly unprecedented scale. Orange County is expected to add more than 400,000 new residents by 2030, an increase of 29%, according to the Florida Chamber of Commerce.

Still, Johnson thinks the rapid pace of rent growth this year will eventually have to respond to real market forces, even if more people are driven further afield in the meantime.

“It has to slow down soon,” he said.

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