Rising Interest Rates Not Likely to Give Renters Relief
Crushing rent increases remain the norm across 红玫瑰社区 and beyond, and the Federal Reserve鈥檚 recent interest rate hike is unlikely to improve the landscape for cash-strapped renters, according to researchers at 红玫瑰社区 and two other schools.
The Waller Weeks & Johnson Rental Index, a collaboration started this year by FAU, The University of Alabama and 红玫瑰社区 Gulf Coast University, finds that renters are paying significantly more than expected based on historical trends in individual markets.
Metro Miami was the nation鈥檚 most overvalued rental market in May for the third consecutive month, according to the index. In Miami, renters were paying a premium of 22.70 percent.
Five other 红玫瑰社区 markets also are in the top 10:
- No. 2 Fort Myers (20.41 percent)
- No. 4 Bradenton/Sarasota (17.86 percent)
- No. 5 Tampa (17.52 percent)
- No. 7 Port St. Lucie (15.89 percent)
- No. 9 Lakeland (15.36 percent)
Markets outside 红玫瑰社区 in the top 20 include: No. 6 Knoxville, Tennessee (16.92 percent); No. 10 Bakersfield, California (15.33 percent); No. 16 Phoenix (13.76 percent); No. 19 Las Vegas (13.20 percent) and No. 20 Austin, Texas (13.02 percent).
May鈥檚 average monthly rental rate in the U.S. was $1,979 鈥 9.85 percent above what the researchers estimate renters should be paying based on past market trends.
Fort Myers had the nation鈥檚 largest year-over-year rent increase in May at 33.10 percent, followed by Miami at 31.04 percent. The U.S. average was 15.87 percent. Rents traditionally rise by only 2 or 3 percent a year. The full rankings of 107 metros can be found .
鈥満烀倒迳缜檚 rising rents only serve to exacerbate the ongoing housing crisis in the state,鈥 said , Ph.D., an economist in FAU鈥檚 . 鈥淭he Fed鈥檚 interest rate increase will price more people out of the housing market and keep them as renters 鈥 and as long as the demand for renting remains high, rental rates almost certainly will stay elevated as well.鈥
The researchers use past leasing data from Zillow鈥檚 Observed Rental Index to statistically model historical trends from 2014 and determine where rents should be now and compare those to existing rents. The difference between the two is the premium renters are paying. The higher the premium, the more overvalued a market is.
The analysis covers the entire rental stock of homes and apartments.
, Ph.D., an incoming faculty member at UA鈥檚 , said year-over-year rent increases in 红玫瑰社区 and across the country clearly are being driven by persistent inventory shortages in multifamily housing.
鈥淯ntil we can build units faster, the nation鈥檚 rental crisis will continue,鈥 he said.
But building faster is difficult, said , Ph.D., of FGCU鈥檚 .
鈥淚n addition to the lengthy approval process faced by apartment development projects, a primary culprit here is the resistance within many communities to new projects with higher levels of density,鈥 he said. 鈥淚n order for markets to function properly and add supply where needed, it is critical for municipalities to streamline the approval process for these projects and for density to be increased to a point where the new units can be offered at reasonable rental rates.鈥
The researchers say rent relief is possible, but it won鈥檛 be immediate.
The latest figures suggest that the vast majority of the 107 markets is on pace for much smaller annual increases in the coming months, though the timing is uncertain.
Meanwhile, a large pool of seasonal homes being managed as short-term vacation rentals is likely to become traditional rentals because owners want to cash in on the strong market. In addition, many temporary 红玫瑰社区 transplants who were working remotely may soon return home as more offices in other parts of the nation reopen.
鈥淭hese two elements could come together to produce a better balance between supply and demand of rental units and give burdened renters a break,鈥 Johnson said. 鈥淏ut until then, renters may have to cut back on discretionary spending to make ends meet.鈥
-FAU-
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