Study: rent increases slow as supply increases in the market

According to researchers from Florida Atlantic University and two other schools, most major metropolitan areas have seen monthly rent declines, further evidence that the rental crisis is easing across the country.

In October, 68 housing markets had lower average rental rates, compared to 38 in September. Springfield, Massachusetts; Austin, TX; Seattle and New York are among the metros where rents are dropping. The average rental rate in the United States was $2,040, down 0.9% from September.

“It appears that an increase in supply has helped relieve price pressure on rental accommodation across the country – and that’s exactly what needed to happen,” said Ken H. JohnsonPh.D., Economist at FAU College of Business. “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”

Despite the slowdown, rental rates remain high in some markets, including Florida. Cape Coral-Fort Myers led the United States with both the largest year-over-year rent increase (17.16%) and the largest premium (17.37%). A premium is the amount above the long-term rental trend that tenants must pay. Rents generally only increase by 3 to 5% per year.

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Most rents in Florida are falling month over month, but Cape Coral-Fort Myers saw a 1.76% increase in October.

“The significant increase in Cape Coral-Fort Myers is very disheartening, but not surprising,” said Shelton WeeksPh.D., Florida Gulf Coast University Lucas Institute for Real Estate Development and Finance. “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.”

Las Vegas posted the smallest annual rent increase in the nation at 1.58%, while Minneapolis saw the smallest premium at 1.03%.

Bennie WallerPh.D., from the University of Alabama Culverhouse College of Commercesaid national data reveals that much of the significant rent increases came from six and 12 months ago.

“Over the past two months, rents are slowing down and returning to a more normal year-over-year trend,” he said. “It’s clear that much of the country is starting to shed these steep increases, which have been so devastating to consumer budgets.”

Researchers use rental 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 housing stock and of apartments.


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