Right now, if you’re a landlord, you’re likely doing well with your investments. If you’re a tenant, you’re probably getting fed up with the increasing rental prices.
What’s interesting is we’re not alone down here in our cornered off section of Florida. All across the nation, property owners are feeling good about the types of rents tenants are willing, or maybe a better word is forced, to pay for their unit.
2016 saw one of the largest increases in rent nationwide, and that trend continued midway last year, and then we saw a small dip. This can be seen in the graph below.
It’s interesting to see that this was a national trend, because we certainly noticed it here in Southwest Florida. Although the dip in rental activity was slight, it was definitely present. We had more vacancies than we normally do, and some landlords were forced to lower their asking prices to entice renters.
If you notice the blue line which represents the most recent time frame, you’ll notice a small uptick in activity. The downturn in activity was a .5% fall over 5 months, but we are already up .1%.
Now, overall, these are very minor adjustments. Our market is still extremely strong, and the amount of rental leads we receive on a daily basis is still in the “this is insane” category. It’s quite simple, those who want to live here are willing to pay the price.
Comparatively, our average rents are still way less than others looking to reside in cities like St. Petersburg, or Tampa FL. These two cities have seen some of the largest rent spikes in history, and the cost for small 2 or 3 bedroom is close exceeding 2k in most areas.
However, in cities like North Port, Port Charlotte, Lehigh, Ft Myers, and Cape Coral, rents are still “affordable” with the average 3 bedroom coming in around $1,300 a month.
What’s to Blame for Rising Rents?
There’s really two main facets we can point or fingers to when it comes to the rising cost of rent.
1. Supply and Demand
Right now, there simply isn’t enough property to live in. There is a greater population looking to live here than there is housing. Anytime this is the case, prices go up since living space is hard to come by. This is why you’re starting to see major construction going on in our area, and nationally for that matter. Just in Cape Coral, an apartment complex just finished going up off of Veterans, and another massive one was just approved for the Northwest Cape Coral area. These are HUGE indicators of growth. Also, roads are being widened, infrastructure (water and sewer) is being added, etc. So, simple economics are to blame!
2. Wages are Increasing
When we’re talking about the increase in rental prices, it’s important to focus on inflation, and wage increases. Here’s how the numbers look as of now…
So, this means that even though inflation is rising, the cost of rent is rising more, but even more than that, wages are increasing even more…that didn’t roll off the fingers too easily, but hopefully you get the point. The bottom line is people are able to afford the increase in rent.
How long will this continue?
If you can answer this one, let us know. The only way we foresee this collapsing is if wages severely drop, or financing for buying a home becomes much easier and requires less money out of pocket. We’re already starting to see the latter happen as a decent amount of our current tenants are in the process of getting pre-approved to purchase a home.
So, in the end, it seems to be good news for everyone. On a general scale, landlords are making more money off their investments, and tenants are seeing an increase in wages and more money in their paychecks because of the new tax reform.
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Data and statistics derived from www.apartmentlist.com