With renters waiting for the rental crisis to ebb, some markets might be more favorable based on long-term pricing trends, according to researchers at Florida Atlantic University and two other schools.
With renters across the United States waiting for the rental crisis to ebb, some markets might be more favorable based on long-term pricing trends, according to researchers at Florida Atlantic University and two other schools.
Rental markets in western states are seeing their rental premiums decline or come close to returning to their historical trends, while a few markets are trading at a slight discount relative to their historical trend as rent growth slows throughout the country, according to end of July data from the Waller, Weeks and Johnson Rental Index.
The average rental in Boise, Idaho is renting at a .04 percent discount relative to its historical trend, suggesting that renters could score a slight bargain on the typical rental unit in the area. It’s followed by Sacramento, California at a .02 percent discount; Las Vegas, .39 premium; Spokane, Washington, .40 percent premium; San Francisco, .62 percent premium; Stockton, California, .66 percent premium; Minneapolis, .83 percent premium; Phoenix, .99 percent premium; Colorado Springs, Colorado, 1.55 percent premium; and Seattle, 1.98 percent premium.
“These are the markets that are most ideal for a renter solely based on long-term rental pricing trends. Since many of the rents in these areas are either below or close to long-term historical trends, renters in these markets are not overpaying,” said Ken H. Johnson, Ph.D., real estate economist with FAU’s College of Business.
The Waller, Weeks and Johnson Rental Index, a sub-section of FAU’s Real Estate Initiative, measures what the average rent is in the 100 most populated metropolitan areas in the county compared to where rents should be based on historical rental pricing trends. The index, from researchers Johnson, Shelton Weeks, Ph.D., of Florida Gulf Coast University, and Bennie Waller, Ph.D. of the University of Alabama, also measures average yearly increases, monthly increases and how much money the typical household needs to make to avoid paying more than 30 percent of their income towards rent.
Lower rental premiums, while a good sign that rents are returning to normal after years of astronomical increases, do not necessarily mean that each individual market is affordable for renters, researchers warned.
“It means that rents have settled in many markets and are back to where they should be based on historic rents for a given market,” Weeks said. “For example, Sacramento has historically faced housing affordability issues and these issues continue. Now, however, rents are returning to typical levels, more in line to local norms rather than being dramatically overpriced.”
Some markets, like those in Florida and on the East Coast, are still waiting for rents to come back to normal. Charleston, South Carolina has the highest premium in the country, at 10.72 percent; followed by Knoxville, Tennessee, 10.31 percent; New York, 9.81 percent; Miami, 9.27 percent; New Haven, Connecticut, 9.02 percent; Akron, Ohio, 8.86 percent; Cape Coral, 8.76 percent; Madison, Wisconsin, 8.48 percent; El Paso, Texas, 8.45 percent; and Hartford, Connecticut, 8.19 percent.
“Two Florida cities are still among the most overpriced rental markets in the country,” Johnson said. “However, the recent Live Local Act should help significantly by encouraging the development of multifamily housing. It could give us a fighting chance of getting premiums down by increasing the supply of multifamily housing significantly and in relatively short order.”
Researchers warn even as premiums lower, renters are still in for an affordability crisis until incomes rise and more units are built.
“Overall, it’s a sign that we are trending back towards normal,” Waller said. “Patience is in order, but we have probably heard the end of calls for rent control.”
-FAU-
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