The degree to which rent costs are skewing above their expected levels fell slightly this month, according to the latest analysis from researchers at Florida Atlantic University (FAU), Florida Gulf Coast University (FGCU) and the University of Alabama, even as some metros continue to see average rent balloon further into “overvalued” territory.
Ranking 109 metros based on how much more expensive (or cheap) rents are compared to modeled predictions, the collaborative project (dubbed the Waller, Weeks and Johnson Rental Index) continues to find a vast majority of markets overvalued—an average of 8.72%—even as a few are seeing some movement toward more reasonable levels.
“By and large, areas with the lowest rent increases are places with stagnant or declining populations,” said Shelton Weeks, of FGCU’s Lucas Institute for Real Estate Development & Finance, in a statement. “In markets with growing populations, such as most of Florida, landlords can charge what they want because there’s always somebody willing to pay it.”
According to the latest analysis, 46 cities are at least 10% overvalued, and only one—San Francisco, California—has seen rent increases that are actually lower than predicted by the model.
At the same time, 12 cities saw their average rents move closer to expected levels (some only fractionally), indicating that price increases may begin to moderate—even if rents don’t actually drop. The researchers note that under “normal conditions,” rent costs go up between 3% and 5% a year.
Those cities were Sierra Vista, Arizona (4.33% closer to predicted value); Jackson, Mississippi (1.21%); Ventura, California (0.88%); Honolulu, Hawaii (0.71%); Fresno, California (0.65%); Port St. Lucie, Florida (0.52%); Providence, Rhode Island (0.15%); Phoenix, Arizona (0.10%); Fort Myers, Florida (0.09%); Stockton, California (0.08%); Harrisburg, Pennsylvania (0.07%) and Chattanooga, Tennessee (also 0.07%).
One trend the researchers noted was a moderation in how fast rents in Florida specifically are rising, and conversely, an acceleration of rent increases in New York. Ken H. Johnson, economist at FAU, posited these trends could be the result of so-called “COVID refugees.”
“Those COVID refugees placed a significant burden on the demand for rental units in Florida, and rents spiked to historic highs, while New York became slightly more affordable,” Johnson said in a statement. “With those workers returning home, Florida should see a cooling in its rent hikes, and New York renters will again have to deal with much higher rates.”
Florida cities still saw the largest increases in premiums year-over-year, with seven of the top 10 most overvalued metros in that state.
Cities that have seen the smallest increases in their premiums—or how much they are overvalued—were predominantly located in the Midwest. Minneapolis, Minnesota; Wichita, Kansas; Milwaukee, Wisconsin; Youngstown, Ohio; Des Moines, Iowa; and Pittsburgh, Pennsylvania, all saw year-over-year increases below 10%.