Rental costs continue to fall in major metropolises across the country, according to the latest research from several prominent economists who have tracked overpriced rents over the past few months.
In September, 38 cities tracked by the researchers saw their rates drop, while in October, that number rose to 68.
“Over the past two months, rents have slowed to a more normal year-over-year trend,” Bennie Waller, a research fellow at the University of Alabama’s Culverhouse College of Business, said in a statement. communicated. “It’s clear that much of the country is starting to shed these steep increases, which have been so devastating to consumer budgets.”
Rental costs have soared for most of the pandemic, up 9.6% nationally since last year, but some cities have seen much larger increases. While interest rate hikes by the Federal Reserve seem to have started to slow the house price boom, the trajectory of rental costs remains uncertain.
“It appears that an increase in supply has helped relieve pressure on rental housing prices across the country – and that’s exactly what needed to happen,” said Ken H. Johnson, an economist at the College of Business from Florida Atlantic University, in a statement. “Additional supply appears to be coming from the delivery of units under construction, an increase in unit density, and the conversion of many Airbnb-like units to long-term rentals.”
The researchers determined where rents should be based on longer-term price trends and measured the amount of premium tenants are paying there, i.e. the amount of actual costs that exceeded projections.
Southern metros continued to have the largest premiums, with the top six most overvalued markets all in the South (and four in the same state). These cities are Cape Coral, Florida (overvalued by 17.4%); Miami, Florida (16.8%); Knoxville, TN (14.9%); Charleston, South Carolina (13.9%); North Port, Florida (13.0%) and Tampa, Florida (12.1%).
Cape Coral has seen a steep rise in rental costs, even as many towns have seen their premiums slow or decline – a trend that Shelton Weeks, a research fellow at Florida Gulf Coast University’s Lucas Institute for Real Estate Development & Finance, attributed at least in part to damage from recent hurricanes.
“The significant increase in Cape Coral-Fort Myers is very disheartening, but not surprising,” he said in a statement. “The monthly index report highlights the continued cost of Hurricane Ian. There are signs of recovery, but affordable housing is expected to remain an issue in this market for months to come.”
Areas that got better news include Las Vegas, Nevada, which posted the nation’s lowest year-over-year rent increase at 1.6%, and Minneapolis, Minnesota, which currently has the smallest. premium, offering rents 1.0% higher than expected.
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