Florida Rental Market Decline: Landlords Face Plummeting Rents

Landlords Panic as Florida Rental Market Faces Major Decline

September 19, 2024

Rising Costs, Falling Rents, and Unsold Homes

UPDATE from: Trouble Ahead for FL Landlords – Renters WIN BIG!

We have changes unfolding in Florida real estate, a real estate market that has a record number of unsold homes stacking up in it. We have gone through moving season, the peak activity of the year, with inventory spiking above pre-pandemic levels, yet we do not have a pre-pandemic level of buyers and new data out from Redfin suggests that asking rents for those holding property around Florida for passive income, their asking rents are cratering in the face of inflating costs all around them and this poses a warning that we are to see likely droves of investment properties hitting the market on top of properties that are already there sitting unsold, even in the face of lower interest rates. Why? Because the same costs that face buyers who cancel on these purchases at record numbers is now facing the investor. We already know in 2024, the average investor is paying 55% more in maintenance and replacement costs to maintain their property over 2020.

Investors are being crushed with insurance costs that average between $8,700 and $10,500 per year. Investors in Florida also do not have the protection of homestead exemptions, so their taxes escalate with the value of the property. Once you factor in that this property might be in an HOA, a property that’s around or above the average price in Florida, you’ll have an investor paying closing in on $2,000 a month just for HOA insurance before considering any mortgage, any maintenance, any expenses that fall on their side of the coin and add to that, going into September, the worst news yet for an investor, your asking rents are falling in all the major marketplaces in Florida. That’s right. Even while it’s going up nationally, it’s actually falling in Florida as we have a historic number of apartments opening up across the state in 2024.

Florida Rents Drop Despite Nationwide Increases

Let’s jump to the story. Redfin reports asking rents rose the most in over a year in August, but remain below record highs hit two years earlier. Now, might I add, this is across the nation.

Florida you’re going to see is faring far worse. The story goes on to say that the median asking rent rose 0.9% year over year in August to $1,645, the biggest annual increase in April, 2023. Nevermind the fact that we’re about to have the central bank reducing interest rates here another week or so as the war on inflation hits a pause. It’s okay that prices are astronomically much higher than three or four years ago. We’re going to pause that because we’re afraid the job market’s going to collapse. The story goes on to say that while rents rose the most in 18 months, August marked two years from when they hit an all-time high.

Lower rents paired with wages growing 3.8% year over year show that rental affordability has improved. But while asking price is up nearly 1%, look who headlines the nation and decreases. San Diego and Jacksonville both fell 13% also recorded double digit decreases in asking rents in August. San Francisco was down 7.8% and Tampa, Florida down 5.8% rounded out the five metros with the largest rent decreases. Now to be thorough, let’s jump one tab back and take a look at this. Orlando’s asking rent is down 0.3%. So a third of 1% since last month, it’s down 4.1% year over year.

Miami up above is down nearly one full percent against just last month and down nearly 4% year over year. Now to call out a few other marketplaces that are actually negative to last year, bucking the trend. Atlanta, Georgia is slightly down by a third of a percent. Austin, Texas down almost 18% year over year. Dallas, Texas down 3.4%. LA down 4.2%. Now my friends, this is perplexing data. It doesn’t make sense.

Why? If you look at the natural economy, if you look at the housing market, Florida still, even for all the crazy stories that we have going on about its housing market has a major influx of people still migrating here. They’re not stopping. And as we take a pulse of supply and demand, unsold inventory is going up. The amount of pendings, canceled contracts, headwinds for the buyer show us that buyers are choosing to rent. Buyers are selecting, they’re opting into the rental market. Yet somehow, even with what seems to be evident rental demand, there’s enough vacancy in the multifamily market or the apartments that are being opened that are actually driving down the price.

Airbnb’s Stock Plunge and the Struggles of Real Estate Investors in a Broken Market

Now we’re seeing the same trend in Airbnb. If you were paying attention over the past three or four weeks, you’ll notice the Airbnb had a 14% one day fall off. Their stock went wily coyote right off a cliff in a single day, because as they reported earnings, they’re way off and this kind of rhymes with what I’m also seeing in the market here and hearing from investors saying, Hey, you know what, since the peak of the pandemic stimulus, as that cash has dwindled down, as the consumer has had less and less than savings, as we can see the rate of high interest credit card debt is off the charts record high showing an absolute distress consumer. So, so a phenomenon that I think is happening is that the buyers themselves and the tenants, the renters, they’re just broke. Demand is breaking down because I believe in the middle class on down, there is a micro depression of sorts happening to this class of people.

The inflation has just broken them. There’s nothing left to charge them. But as I told you earlier, it’s easier to simply look at the landlord and call them greedy in the comments, but you have to understand the landlord’s paying 55% more for repairs. They’re paying way more for taxed insurance than just a few years ago. The money you’re paying them is going to home Depot. It’s going to an insurance company and it’s going into the school districts and it’s going into the roads through property taxation and I don’t care how low the mortgages that these investors are holding. You are going to see into the fall loads of investors dumping real estate and think about the capital loss that it takes to actually sell a property that no one occupies. You have these investors now coming to a situation where they’re not likely going to put the house on the market with the tenant in place.

I mean, a tenant in place on today’s market, you’re going to, okay, I have a house. There’s a tenant in there till the end of the year. Please see my house. Well, the people buying these houses, you’re not going to have another investor coming into this type of situation, buying it from an investor. You’re likely marketing to owner occupants and end users. Those people don’t want to wait five months for a tenant to come in their lease and honestly, properties with tenants in them don’t show that well. And unfortunately, if you’re selling a home as investor in Florida with a tenant in it, you’re up against a lot more competition than you were a year or two ago. And some of that competition is sparkling and way better looking.

Investors Face Tough Choices

So unfortunately for investors, you’ll eventually decide, Hey, my house is vacant. I need to get rid of it. And now you’re facing steeper competition, extended down market times. It might cost them seven, eight, $10,000 in holding costs just to have an empty house on the way out.

If you’re holding a house now, and you’re already losing money month after month, it might just be time to sell it and get out for as much as you can. If you’ve watched this far, do me a favor, jump down below and smash the thumbs up, drop in the comments, say hello. Let me know what you’re seeing in your marketplace and let’s keep the conversation going.

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