Currently, there is no doubt that rental prices are high. In some markets, prices are nearing record highs. Rent increases are placing a severe strain on the monthly budgets of many Miami renters. It’s understandable why, given that listed rents have increased by 15% nationally and by as much as 30% in some cities. The pressure to rent grows at the same time that inflation and rising interest rates are pricing out a lot of buyers from the housing market. So, why is this trend occurring? And when will rent begin to decrease once more? Here is a look at the current state of rental prices and the reasons why analysts predict a decrease in them soon.
Why is Rent So High?
Rent prices are currently rising due to several factors. There are fewer rentals available on the market, a slow rate of new construction, a fiercely competitive residential real estate market, and still-present repercussions from the eviction moratorium during the pandemic. Let’s explore each aspect in more detail.
Slow Pace of New Construction. The market for single-family homes has been thriving for several years, but this growth has not translated into the construction of many new apartment buildings. It is much more profitable for developers to construct single-family homes or luxury apartments than to construct more affordable housing. Because there aren’t enough new housing units to meet demand, the rental market has been tight for years.
High Home Prices. The state of the home buying market is another component pushing up rental prices. In many markets, prices have reached all-time highs after steadily increasing for several years. Prospective home buyers now find it more challenging to afford a home due to rising mortgage rates. As a result, more people are more willing to rent rather than purchase, which drives up prices even further.
Fewer Available Rentals. The combination of high demand and low supply has diminished the number of available rental properties on the market. The number of rentals that are available nationwide has decreased by 20% since 2019 according to a recent report from Apartment List. Even fewer units are currently on the market in some places.
The Eviction Moratorium. The moratorium on evictions is the final factor raising rents. The moratorium put in place last year to safeguard tenants during the pandemic has made it more challenging for Miami property managers to evict non-paying tenants. As a result, many landlords are reluctant to rent to new tenants out of concern that they won’t be able to recoup their losses if the tenant fails to pay.
When Will Rent Start to Go Down?
Now that we’ve reviewed the factors that are driving up rental costs, you may be curious when they will begin to decline. It is difficult to state with certainty. There are, however, pieces of evidence that the rental market may soon begin to cool. One is the slowing down of single-family home sales. In turn, fewer people might decide to stay in their homes rather than relocate, which would reduce the demand for rental housing.
The fact that the building of new apartments is finally starting to pick up speed is another indicator that rents may start to decrease. Changes to the tax code that increase the profitability of developing rental properties have contributed to this. Thus, even though it might take a while for these new apartments to go on the market, they should help alleviate the rental market’s limited supply and help keep rent prices in check.
There is some hope that relief may be on the way if you are struggling with high rents. To make ends meet, however, be sure to stick to your spending plan and comparison shop.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.