As rent growth slows nationwide, some markets are now more favorable for renters based on long-term pricing trends, according to researchers at Florida Atlantic University and two other schools. In such places, rents are trading at a slight discount, relative to their historical trend, according to the Waller, Weeks and Johnson Rental Index, a subsection of FAU’s Real Estate Initiative, which measures what the average rent is in the 100-most populated metro areas compared to where rents should be based on historic rental pricing trends.
For example, rental markets in Western states are seeing their rental premiums decline or return close to their historical trends. Case in point is Boise, Idaho, where the average rental is priced at a .04%. discount, relative to its historical trend, which would give renters a slight bargain on a typical unit in the area. In other nearby Western markets, the discounts and premiums hover near that. Sacramento, Calif., renters would probably get a 0.2% discount; in Las Vegas it would be a .39% premium; in Spokane, Wash., a .40% premium; in San Francisco, a .62% premium; in Stockton, Calif., a .66% premium; in Phoenix, a .99% premium; in Colorado Springs, Colo., a 1.55% premium, and in Seattle, a bigger 1.98% premium. In the Midwest, the same trend is happening in Minneapolis where there would be a .83% premium.
All these markets are the most ideal for a renter based on long-term rental pricing trends, according to Ken H. Johnson, Real Estate Economist with FAU’s College of Business. “Since many of the rents in these areas are either below or close to long-term historical trends, renters in these markets are not overpaying,” he said.
However, researchers offered a caveat: trends remain local and not every individual market is becoming more affordable for the renter cohort.
Yet, it indicates that “rents have settled in many markets and are back to where they should be based on historic rents for a given market,” said Shelton Weeks of Florida Gulf Coast University. “For example, Sacramento has historically faced housing affordability issues and these issues continue. Now, however, rents are returning to typical levels, more in line to local norms rather than being dramatically overpriced.”
Some markets still require renters being more patient of the trend happening in their area. Examples are in Florida and on the East Coast. Charleston, S.C., has the highest premium in the country at 10.72%, followed by Knoxville, Tenn., at 10.31%, New Haven at 9.02%; Akron, Ohio, at 8.86%; Cape Coral, Fla., at 8.76%; Madison at 8.48%, El Paso at 8.45% and Hartford at 8.19%.
Although two Florida cities remain among the most overpriced rental markets nationwide, according to Johnson, he thinks the Live Local Act should help by encouraging development of multifamily housing and getting premiums down when supply increases. The Live Local Act is a statewide workforce housing strategy designed to increase the availability of affordable housing opportunities by providing funding for workforce housing, according to the Florida Housing Finance Corporation’s website.