Trouble Ahead for Florida: Renters Win Big with Falling Rent Prices

Falling Rents in Florida: A Surprising Trend

New data out right now suggests that if you are a renter in Florida, you are going to be bargain hunting. This is a headline that, number one, I did not expect, and number two, kind of terrified me. You would say, “Jared, why would you be terrified if rents in Florida are falling?” Well, you have to understand there’s a major backdrop of inventory surging in Florida. This is no secret; it’s actually probably the biggest click-baited article that you’ll find on the interwebs. People know that Florida has a deluge in available supply, but if there’s more people running from inventory, which creates the high inventory, the buyers are basically backing away, saying, “Enough’s enough, I can’t afford it,” and are leaving the market to rent. They’re choosing to lease by choice if everybody, by and large, in Florida is going to lease to such a degree that the housing inventory is stacking up to levels not seen in five years.

Okay, so Florida’s one of three states that has inventory at pre-COVID levels, meaning the normal times of 2018 and 2019. Florida is well into that category of time with way fewer buyers. We already know the national narrative that buyers feel like it’s probably the worst time on record to buy a house right now. So, if they’re all going into the rental market at the same time, having headlines saying that all of Florida’s most populous markets are seeing their rents crater is absolutely mind-boggling. And it’s terrifying when you think of what’s about to happen in Florida from the aspect of other people randomly trying to sell their homes in this marketplace.

On today’s video, not am I gonna give you an update of exactly what’s going on in the Florida rental market, but I’m gonna talk about the national numbers, what’s going on across apartments, single-family homes, multi-family, and the rental situation across America right now. But obviously, an emphasis on Florida because, folks, it’s bucking the trend. It is a massive head-scratcher. And if you are a property owner in Florida right now, you are considering investing in Florida and you’re a tenant looking to rent here, or you’re coming up on a renewal and you just wanna know what’s going on, this is the video for you. So jump down below and smash that like button as I jump into the data. Let’s get started.

Rising Costs for Landlords

Record high mortgage levels are starting to take their toll. The mortgage rate is at 14 and three-quarter percent. Ask not what the great reset can do for you; ask what you can do for the great reset. I know what you’re thinking, renters: “Hey, you know what, Mr. Landlord just cut the price. You’ve been collecting a lot of rent for years and I know it jumped about 37%. You should be able to handle the rent cut.” But this is the problem—they’re not. Let’s read this article. The home insurance shock hitting the housing market has landlords concerned as well. Resi Club, a data company, goes out and interviews several hundred short, long-term investors and Airbnb investors. You can see that the investors that they surveyed in the Florida market, down in the south, were anywhere from 41 to 56% concerned about the situation.

Financial Strain on Investors

Now, think about this. Everybody’s already in their heads going, “Hey, you know what? If they cut the rents, no problem. They got a little profit still.” Well, you have to understand that investors might be making a thousand dollars a month, for example, on their property above their mortgage cost. Well, many of these investors even this year got a notice that their insurance goes up $500 a month. If they were only making a thousand, that cuts their margin in half. And yet when these tenants move out, they still have to paint the walls, replace the carpets, and all these different types of things. And if you’re in Florida and you own a condo, the condo owners are getting squeezed with massive new assessments. Many of the reserve accounts across the state of Florida, they’re getting these surprise knocks on the door and the homeowners are literally catching up thousands of dollars a year per unit to get their reserve accounts back on hand. I’ve heard of two different stories this week where single condo owners in each of the properties were five and six figures per unit behind on their bills. And surprise, they get a notice that they’re now paying thousands more.

And if you’re an investor, you are already terrified. Now, fast forward, we have the data coming in that we’re seeing rents in 2024 collapsing. And what’s the surprise about that? Well, that’s because it’s only collapsing in Florida. It’s not actually collapsing in the rest of the country. In fact, the rest of the country is still facing rising rents. Now take a look at the latest data here provided by Calculated Risk newsletter. Apartment List asking rent growth is up 0.7% year over year. Sarah says rent prices ticked up for the fifth straight month, but rent growth over the course of 2024 as a whole remains modest, signaling ongoing sluggishness in the market. To summarize, since the second half of 2022, seasonal declines in rent prices have been steeper than usual, while seasonal increases have been more mild. As a result, apartments are slightly cheaper today than they were a year ago, except in Jacksonville, Florida, and Tampa.

We’ll get there in a second. Now, how about the rest of the market outside of apartments? Well, Realtor.com reports 10 consecutive months with year-over-year rent declines. In May 2024, the US median rent continued to decline for 10 months. Now, don’t get so excited. After 10 declines, the US median rent is only $24 less than the peak of August 2022. So, basically, in 10 months of decline, it’s dropped 1.4%. Yeah, we have inflation under control. I’m sure the little guy’s doing just fine now, not according to CNN, the number one name in news. Renters are struggling more than homeowners in America’s tough housing market. And what does the report say? Renters who spend more than half of their household income, more than 50% just for the apartment and utilities, rose in 2022 to a record high of 12.1 million, up 1.5 million from levels before COVID. And again, this is an old report.

What do we have now? And I would adjust this for reality to maybe like 18 million. So give it a 30% plus of people in America that are truly today spending more than 50% of just their income on shelter expenses. And mind you, we only have around 41 million renters total. All of this leads me to believe that we are in a very stressed-out economy, right? So you have one end, you have this tenant, and they’re like, “Oh my gosh, am I gonna be okay when it comes time for renewal?” And in most parts of the country, they’re saving $24 since the Federal Reserve started raising interest rates. Take that doves. You got these doves on Wall Street, by the way, and Washington DC, that are constantly drum-beating, “Okay, we’ve beat inflation. We’ve beat inflation.” Okay? The average person is literally spending all their money on shelter. Okay?

Where I’m at in Orlando, everybody’s wondering, “How come Disney World’s empty this summer?” Well, it’s because everyone’s paying the rent. But now listen, on the other side of the equation, you have a landlord. Now, landlords are also sometimes in la-la land, like the Smurfs, like la-la, la, la, la. Some of them are stressed. Okay? We already know, we saw the data, like 50% of them are like, “Oh my goodness, is my insurance gonna collapse my rental income?” Well, then you have them renewing their lease. The tenant’s lease comes due.

The person that’s been living there for one year or two years, and the landlord who lives in Canada or Brazil or Idaho or Alaska, wherever they own properties in Tampa and Jacksonville and Miami, and they’re sitting here thinking, “You know what? Everything’s fine down there in Florida. They’re like invincible. It’s Sunshine State, like it attracts northerners like bees to honey, and they’ll pay whatever for housing there.” And all of a sudden, they’re stunned to find out that, surprise, you are now losing revenue. You’re asking rent is dropping over last year in a substantial amount depending on which markets you have. So then all of a sudden, you get an insurance bill that says you owe more. All of a sudden, that thousand-dollar spread you have in monthly cash flow as an investor because you know you did the BiggerPockets thing, and you’re making some money or some cases. There’s a ton of Airbnb owners now that are all of a sudden, they’ve been break-even, break-even, like marginally probably losing money, all of a sudden finding that the squeeze is now on.

Market Dynamics and Future Trends

Okay, so walk with me on this. What do you do as a landlord where you had a very slim margin to begin with? Your expenses are going up, and now your receivables are going down. And my friends, the things that are causing them to change, such as massive multifamily expansion that was done over the past three years. A lot of these buildings and apartments all around us in these major metropolitan areas of Florida, they’re all being released. They’re all coming to market in 24 and 25 and 26. And my friends, just like buyers are looking at the housing market and saying, “Enough’s enough.” You obviously have situations where renters across Florida are reaching a breaking point. You might be having an early test flight in Texas and Florida and Idaho where you have deluges of inventory already here.

Now all of a sudden, you’re gonna have a lot of landlords saying, “Enough’s enough.” And I believe this is not just gonna trickle from the mom-and-pop landlord. This is also going to be the Wall Street guys, the American Homes for Rent, the Invitation Homes, the people that bought thousands of homes here between like 2011 and 2015 and built up massive communities of houses all across the state. They’re seeing their revenues squeezed for all the reasons now rents are coming down. How long before the investors that hold stocks in those companies start putting the call out and saying, “Are we still in Florida? Are we gonna hold there? Do we not think it’s time to get out?” And the call might be made where the corporate seller in 2025 may not be the bank or a bank-owned home. It might be a corporation on Wall Street that says, “Enough’s enough. We’re dumping all of our stuff. It doesn’t make sense anymore. Let’s get out.”

Advice for Renters and Property Owners

Alright, Jared, I’m a renter. I’m coming to Florida. I’m all excited. I wanna cut my shelter costs. Are you serious? There’s actually bargains in Florida. Where are they? Well, I’m glad you asked. Let’s check it out right now. Redfin reports rent prices are dropping across Florida’s most populous metros. The article starts by saying the asking rent across America again is up. It’s up 0.7% year over year for June. And here’s where the fun news starts. It says, “Florida is bucking the national trend. The Sunshine State’s four most populous metro areas are seeing rent price declines. Get this: Jacksonville’s median asking rent fell 12.4% year over year in June, the Metro’s biggest drop in records going back to 2019. Tampa posted a 6% decline, which is its largest loss on record. Orlando and Miami saw rent prices fall 4.8% and 3.8%, respectively. And we’re in good company, folks, because rents are also falling fast in Austin, Texas. The median asking rent in the Texas capital decreased a record 12.6%, just like Jacksonville.”

This is why I think this is an interesting indicator for the future of the housing market in Florida. I have been long saying that the inversion between rent and ownership is going to be fixed in the future. That you say, “Hey Jared, how will we know the correction? How will we feel it?” Because you see, right now it is way more expensive to own a home than to rent one. If you are literally considering where you live based on shelter cost, you take rent in one hand, you take ownership in the other hand, and rent in some cases gonna be half the cost per month. If you’re putting like 10% down on a mid-range home in my marketplace in the middle of Orlando, if you’re at the entry price, you’re probably saving about 30% every month in cost rent versus own. Jerry, didn’t you just say rents are actually cratering right now? So track with me on that.

If we already have a massive slope in buyer demand, buyers saying, “See ya, sellers, too much, I’m walking,” and they’re choosing to rent, and the gains of rent growth, how high and how hot it’s gotten, particularly in Orlando, it’s up like 37% in like three years. If the air is starting to come out of that, how much easier does the decision get? How much harder does the housing market have to work to attract a tenant in a high interest rate environment? Yes, it’s going to get harder. If anything, this will create more softening in the housing market as number one. More landlords getting their margins crushed, are gonna put their houses in the market along with a lot of other inventory. And number two, this messes demand up even worse where most buyers would rather rent maybe because they have no other choice. And ultimately the ones that had a choice and had the money will probably opt into leasing anyways because it’s so much more of a stark savings except for if prices of homes come down or interest rates, whichever comes first. And as you know, I’m not a big candidate who thinks interest rates are coming down anytime soon.

The Blue Line of Rent vs. Ownership

If you want evidence of why I think Powell’s gonna hold rates higher, go to my video I just released on Saturday. I walk you right through the details of what he’s saying, which to me means higher for much longer. My friends, look at this chart. The blue line across the top represents the history of renting in every market in Florida. In every market in Florida, the renting blue line is always 15% or so gapped over the cost of ownership every single time, every healthy market. Except if you go to some weird blue city where it’s super inflated and super expensive. This is common for the history of America. Why? It’s common health of the market. Okay, I can save money by buying a house. I have a savings to get into the housing market and then if I wanna lease it out, it’s a little cheaper than rent.

A lot of people will enter my comments and say, “Jared, the real cost of housing is what you can rent it for. Because ultimately, if you can rent a house for cheaper, why would you buy it?” Shelter cost historically has had cheaper levels of ownership. Like again, I could take you all through the markets, but look what happened when we had this crazy monetary policy and a massive housing bubble. Enter 2021, 22, you had the ownership cost line jump way up here. And by the way, this number for Jacksonville is actually far higher.

The gap between these two is even bigger than is suggested here because these are national numbers loaded into this data. And by the way, if anybody knows Nick Grier Venture Consulting, who put this graph out, ask him to update it, please. ‘Cause it’s good data. I would love to see these trends up to 2023. And I’m telling you, friends, housing’s more expensive than last year, which means the gap to own is off the charts. This red line in Jacksonville, the blue line’s probably down here still somewhere. It’s obviously falling 12%. So the blue line’s down here, right? According to data, it’s cheaper than this same point last year. And the red line’s off the charts, off the edge of the graph. And I would contend that prices will come down to bring the red line back under the blue line.

Planning for Future Investments

Been a long-time contingent of mine that this inversion is a sign of a recession coming. This inversion of all the Central Florida markets, the red line will eventually dip below the blue line and a combination of reflection in housing, prices changing, coming softer and interest rates coming down. But my friends, I am telling you one of the hardest things about this inversion process is that you are having, for instance, in Jacksonville, they’re losing those rental gains, which means that red line’s gotta come way back down. And as I look at this chart, and everybody, you’ve been watching my channel for two years, and we’ve seen interest rates pop, and many of you have been patiently waiting. “Jared, when is a price correction coming?

When can I get off the sidelines and get back in and make some moves and buy some real estate?” And we all know that this is something like we’ve never seen before. So we do not know. A bubble of this magnitude has never been produced in probably a hundred years, at least in modern American times. There’s never been a bubble like this. So people predicting soft landings, it’s all fairytale language. Nobody knows how the correction of this situation looks like. They don’t know how it’s going to feel. And ultimately, we didn’t know how long it would take for all the surplus monetary policy and things to shake out of the system. But at least in Florida, there are obviously some major shifting signs.

Now, what do you do with this news? Well, I’m gonna tell you, number one, if you are in the market to buy an investment property in Florida, a lot of you call me and you say, “Hey, you know what? I’m gonna buy a property. I just need to be slightly positive. I wanna buy this for something. I wanna hang out at the beach for my family a couple months out of the year or three weeks out of the year and let it be rented out the rest of the year.” Give yourself more margin.

If you’re one of those folks that says, “I’m gonna buy a secondary home or something like that, and I’m okay if it breaks even,” right now, that is a bad plan. I’m saying that if you’re a break-even standard, give yourself a 10 or 15% plus side in the beginning just in case it corrects back so that maybe you’ll stop and end on a break-even.

And secondly, if you own a property now as an investor and you already are seeing the effects of the market and you feel like there’s a point where you are walking a line, if you do not sell it, I would tell you in my opinion, consider selling sooner than later. If you’ve gotta run to the bathroom, it’s a bad idea to show up in the intermission when the line’s already formed, right? If you gotta get out of the market, you don’t want to go with the crowd, and it may already be a crowd, your market may be flooded with inventory as it stands, as many parts of Florida already are.

This isn’t investment advice; it’s just an opinion of a person on YouTube. So take it as a grain of salt and make the best decision for your situation. And if you are a renter, now, keep your eye on the rental situation in your area when you get that renewal notice. And it’s an automatic function of the property manager who automatically adjusts things 3% every year. They send you the notice, see what’s going on with the other rentals in your area. Are you noticing some downtrends? Because I guarantee your property manager notices it, and they probably hope you just bite off on the increase. But before you do that, see what other options exist. You might be bargain hunting in the marketplace you’re in.

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As a top real estate agent with nearly 4,000 homes sold and over 20 years of experience in the Florida real estate market, I have the expertise needed to help you navigate today’s evolving landscape. Whether you’re looking to buy or sell, my deep understanding of market trends and personalized approach will provide you with the insights and strategies required for success.

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