Florida is the center of the national rental surge, new research has found.
The Florida Atlantic University College of Business, in partnership with researchers at Florida Gulf Coast University and the University of Alabama, analyzed U.S. rental markets to find which ones were the most overvalued, or priced above its historical trend, according to a media release.
In the 25 most overvalued rental markets, the leading five were all in Florida. Tampa Bay ranked third.
Tampa Bay rents are at a 17 percent premium, meaning that average prices should be closer to $1,732 a month based on the area’s long-term trends but they’re currently closer to $2,029. Miami is the most overvalued rental market in the U.S., with a 21.75 percent premium, followed by Fort Myers (18.16 percent), Tampa Bay, Sarasota (16.98 percent) and Port St. Lucie (15.61 percent).
Other Florida cities were also listed in the 25 most overvalued rental markets: Lakeland, Daytona Beach, Jacksonville, Orlando and Melbourne.
“Florida is a popular destination under normal circumstances, and it’s even more desirable now because its pandemic policies strongly favored consumers and businesses,” said FAU economist Ken H. Johnson in a statement. “Landlords can charge exorbitant rents because if the existing tenants do not accept the new lease terms, other people will accept them quickly.”
Researchers said there isn’t enough housing availability in the markets and developers are struggling to keep up with demand because of supply chain issues and shortages. The study determined that the recent surge in rental prices is concerning because rent isn’t typically as volatile as the housing market, which is more susceptible to effects from outside factors like mortgage rates.
The study originally analyzed cities in Florida, including Tampa Bay, before expanding nationwide. Researchers calculated where rent prices should be and where they are now using Zillow’s Observed Rental Index.
Johnson, from FAU, also works on a similar project with Florida International University economist Eli Beracha calculating how much housing prices are overvalued in 100 U.S. cities. They found Tampa Bay’s housing market could be reaching its peak, with homes selling at a 40 percent-plus premium.
Bennie Waller, a professor of finance and real estate at the University of Alabama, said the skyrocketing prices are pushing people to commute farther to work for cheaper housing in the suburbs. Yet the cost of cars and gasoline have also spiked by nearly 50 percent, according to data from the U.S. Bureau of Labor Statistics.
“Moving to cheaper areas still involves higher costs,” Waller said. “This is crippling to the average person on Main Street.”