By Gay Cororaton, MIAMI REALTORS Chief Economist
The decline in asking rents that hit Southeast Florida’s rental market in the second half of 2023 appears to have hit bottom. After asking rents on multifamily units declined in 2023 as more rental listings hit the market, asking rents slightly ticked up in February from the prior month in Miami-Dade County (+0.2%), Broward County (+2.9%), and Martin County(5.0%). The median asking rents in Miami-Dade and Broward were the first month-on-month growth since rents started to decline in May 2023. The asking rent was unchanged from the prior month in St. Lucie County (0.0%) and declined in Palm Beach County (-3.6%).
The median asking rents are down from one year ago in Miami-Dade (-6.7%), Broward (-5.7%), and Palm Beach (-4.8%), but up in Martin (0.5%) and St. Lucie (5.3%). However, the median asking rents are still substantially up from the same month in 2019: Miami-Dade (47.8%), Broward (35.0%), Palm Beach (43.8%), Martin (35.5%), and St. Lucie (47.6%).
Asking rent growth has picked up amid challenging affordability conditions. The 30-year fixed mortgage rate increased to 6.74% in February (6.64% in January) while the median condo/townhome sales prices continued to increase as of January 2024 in Miami-Dade (1.4% y/y), Broward (1.9%), Palm Beach (8.7%), and St. Lucie (8.0%), although house prices fell in Martin (-11.1%).
As of January 2024, the median asking rent in Miami-Dade on a multifamily apartment was 10% lower than the typical monthly PITI (principal, interest, tax, insurance) on a condominium or townhome purchased at the median sales price with a 20% downpayment and the assumption that real estate taxes and insurance payments cost about 2% of the property value. In Broward, the median asking rent was 10% higher than the monthly PITI, while in Palm Beach and Martin, the median asking rents were about the same as the monthly PITI.
Pullback in Housing Permits in 2022-2023 To Firm Up Rent Growth in 2024-2025
Lower asking rents compared to the monthly payments on an owner-occupied home will continue to support a strong rental market in 2024. Higher asking rents in other states (e.g. New York, California) will support sustained migration and rental demand in Southeast Florida.
Over the period 2020-2022, the number of new households formed exceeded the number of authorized housing units by 54,000. Household formation surged in 2020 in the wake of the pandemic as Southeast Florida experienced strong migration flows[1] and faster job growth than the nation[2]. In Miami-Dade County, there were 54,887 households formed during 2022-2022, while only 34,829 permits were authorized, resulting in a deficit of about 20,000 units; in Broward County, a deficit of about 28,000 units; and in Palm Beach County, a deficit of about 6,000 units.
Meanwhile, rising borrowing costs in the wake of the Federal Reserve Bank’s rate hikes that started in March 2022 have dampened the number of housing permit applications in 2022-2023. In 2021, 29,304 new households were formed in the five Southeast Florida counties, outpacing the 27,266 housing permit applications in 2023. In 2023, authorized housing units fell below net household formation in Palm Beach and St. Lucie, portending accelerating rent growths in 2024-2025 if the current pace of household formation and permit issuances continue. In Miami-Dade, Broward, and Martin, housing permits are running at about the same pace as household formation, creating less upward pressure on rents and home prices.
[1] Southeast Florida Sees Sustained Migration in 2023 with Driver License Exchanges up 8% – MIAMI REALTORS®
[2] Miami-Dade is 4th largest job creator among 360 largest counties – MIAMI REALTORS®
