Soaring Home Prices Lead to Tough Rental Market
2021 has been a record year in real estate, from the number of transactions to home prices. This trend, seen nationally, is on overdrive in South Florida. We have seen Miami shatter records for annual number of transactions in just ten months. Nationwide home prices have increased 18% in 2021, and prices for homes for sale in the Florida Keys have soared 28.5%! These tremendous growth numbers have not only made the home sales market extremely robust and competitive, but it has had a trickle-down effect of strengthening the rental markets across the country, especially in luxury markets.
National data shows that rental occupancy grew in November to 97.5%. While many focus on the lack of inventory in the sales market, the rental market is seeing the same thing. Since home prices have reached such a high price point, many investors and landlords are cashing out and selling, further reducing the inventory of rentals in many markets. National surveys have seen that a good amount of these landlords are now entering the luxury rental market after the sale, increasing competition as well.
Compounding the problem is the soaring price of real estate in all markets. Increased home values has led landlords to pass along the increases to renters. The average increase in price for a new annual lease in 2021 was up nearly 14%! Typically, renters renewing leases hope to see no increase in their monthly rent, but realistically can expect a marginal increase year over year. In 2021, landlords increased renewal rents for tenants by an average of 8%. That means that for a tenant with a rent of $2,000 per month, their monthly payment would increase on average by $160. Many markets, particularly luxury markets like the Florida Keys have seen increases by much more than these national averages.
Many industry experts are saying that, despite the rising home prices, because of the state of the rental market, it is much more affordable to buy right now than rent. Though increasing, mortgage interest rates remain at record lows. Home values are only continuing to increase in luxury markets like the Keys. All things considered, it is a great time to buy a home in the Florida Keys!
