Apartment rental price growth slows except in Miami
Although median rent growth from new leases has slowed in May 2023, rent growth in Miami still outpaces the rest of the country as the city continues to experience sustained migration.
Nationally, the median rent for a 2-bedroom apartment increased by 10%. down 0.9% compared to a year ago, according to ApartmentList.com, an apartment listings website. In the city of Miami, the average rent paid for new contracts for 2-bedroom units increased by 10%. 1.7%.
Among the top 25 cities selected, Miami ranked second. third place in rental price growth and one of the nine cities with annual rental growth. In contrast, many Sunbelt markets experienced slower rent increases or rent declines, such as Dallas, Tampa, Atlanta, Austin, Nashville, Las Vegas and Phoenix, where multifamily rental vacancy rates were higher. high in some markets compared to the Miami metropolitan area.
Among South Florida cities, the median rent for new 2-bedroom apartment leases increased by 10%. more than 2% in Hialeah (6.7%), Coral Springs (3.8%), Lauderhill (2.0%) and North Miami Beach (2.0%), and the demand appears to come from a group mix of tenants with diverse needs that fit their ability to pay, desire for amenities or lifestyle needs.
This moderate rent growth is healthier than the excessive double-digit increase that occurred in 2020-2021, which reached 10 percent. to reach 18% in November 2021. Rental growth slows as rental listings increase on the market. Income growth began to slow in the second half of 2022 as listings on the market increased. Based on data from RentalBeast®1 and rental listings from MIAMI Realtors® MLS, total multifamily and single-family home listings increased to 22,872 in May 2023, approximately three times the 7,056 listed in January 2022.
The proportion of single-family rentals increased significantly in 2022, reaching 29.1% (24.2% in 2021), and increased This increased further to 33.8% of listings from January to May 2023. In May 2023, there were 7,418 single-family homes available for rent, compared to 2,062 in January 2022. The increase in single-family home rentals could be due to both demand and supply factors. On the demand side, this could be due to the increase in hybrid or fully remote working. Single-family homes offer more work space. A hybrid work schedule also allows employees to live farther away in the suburbs, where single-family homes are more common due to shorter commute times.
In terms of supply, a plausible reason is that some owners choose to rent rather than sell their home by moving to another due to the high rental growth in the last two years and the desire to maintain home capital gains. For example, in Miami-Dade, the median asking rent for a single-family home has increased nearly 80% through May 2023 from May 2019, while the median sales price for single-family homes has increased 69% to $600,000 through April 2023 compared to the pre-pandemic level in April 2019. Another source of supply of single-family rental homes is investors and single-family homes built specifically for rental.
According to Redfin, a national real estate agency, the share of investor purchases in total home sales in the Miami metropolitan area increased from 20% in the third quarter of 2020 to 30% in the fourth quarter of 2023.
In the South region, U.S. Census Bureau data on housing starts by purpose and design indicate that single-family homes built to rent accounted for 7.6 % of total housing starts in 2022 (21,000 homes out of 581,000), compared to just 4.5% in 2019 (17,000 homes out of 497,000 units). In addition, single-family homes built as condominiums (not freehold) can be used for rental purposes, with an average proportion of about 4% in recent quarters nationally, according to the Association of Residential Property. n National Home Builders3.
Solid outlook for rental demand, but financing challenges could limit new housing construction.
The outlook for rental demand in South Florida isfundamentally strong, supported by sustained migration, job creation and the continued recovery of tourism and travel. However, the higher cost of borrowing and reduced financing following the two regional bank failures in March could hinder construction and future supply. Commercial and industrial loans made by all commercial banks have decreased to $2.8 trillion as of May 24, down 2.5% compared to the March 15 level. Commercial and industrial loans are short-term loans to finance working capital needs such as the purchase of equipment.
This reduction could further increase the shortage of new homes for sale or rent in 2023-2024. The imbalance between housing demand and supply appears to be greatest in Broward, where employment is down. increasing at a much faster rate than housing construction permits, with 13 people newly employed in the last 12 months for every 1 housing permit issued in 2022. On the other hand, a tighter offer will maintain The vacancy rate will be around 7% and will support a modest expansion in rental growth.