Rental costs continue to decline in major metros across the country, according to the latest research by several prominent economists who have tracked overvalued rents over the past several months.
In September, 38 cities tracked by the researchers saw their rates drop, while in October, that number grew to 68.
“Within the past month or two, rents are slowing and returning to a more normal year-over-year trend,” said Bennie Waller, a researcher at the University of Alabama’s Culverhouse College of Business, in a statement. “It’s clear that much of the country is starting to shake off these large increases, which have been so devastating to consumer budgets.”
Rental costs have soared through most of the pandemic, up 9.6% nationwide since last year, but with some cities seeing much larger increases. While interest rate hikes by the Federal Reserve seem to have begun slowing runaway home prices, the path of rental costs remains unclear.
“It seems that an increase in supply helped relieve the pricing pressure on rental units around the country–and that’s exactly what had to happen,” said Ken H. Johnson, an economist in Florida Atlantic University’s College of Business, in a statement. “The added supply appears to have come from delivery of units under construction, an increase in unit density and the conversion of many Airbnb-type units to long-term rentals.”
The researchers have tracked where rents should be based on longer-term pricing trends, and measured how much of a premium renters are paying there—that is, how much actual costs have exceeded projections.
Southern metros continued to have the largest premiums, with the top six most overvalued markets all in the South (and four in the same state). Those cities are Cape Coral, Florida (17.4% overvalued); Miami, Florida (16.8%); Knoxville, Tennessee (14.9%); Charleston, South Carolina (13.9%); North Port, Florida (13.0%) and Tampa, Florida (12.1%).
Cape Coral saw a large jump in rent costs, even as many cities have seen their premiums slowing or decreasing—a trend that Shelton Weeks, researcher at Florida Gulf Coast University’s Lucas Institute for Real Estate Development & FInance, attributed at least partially to recent hurricane damage.
“The significant rise in Cape Coral-Fort Myers is very disheartening, though not surprising,” he said in a statement. “The monthly index report is highlighting the ongoing cost of Hurricane Ian. There are signs of a recovery, but affordable housing should remain an issue in this market for months to come.”
Areas that got better news include Las Vegas, Nevada, which posted the nation’s smallest year-over-year rent increase at 1.6%, and Minneapolis, Minnesota, which currently has the smallest premium, offering rents 1.0% higher than expected.