Rent pricing in the country is rising four times faster than the average American’s income, according to 2022 data by Real Estate Witch, a service that provides research and insights about the real estate industry.
The report says rent prices in the U.S. increased 149% from 1985 to 2020, while income only grew 35% in the same timeframe.
In Miami, the average apartment rent this year is between $2,755 and $8,295, according to Rent.com. Studio apartments cost an average of $2,755, while a one-bedroom costs $3,214, and a two-bedroom is $3,990. The average rent for a three-bedroom rental is as high as $8,295.
The rent spikes are a result of the increase in population in South Florida, and the increase in mortgage rates which are ultimately pricing people out of their homes. Andy Zhu, director of business development at Pentagon Holdings said at IMN’s Single-Family Rent Forum on Wednesday that the difference in mortgage rates is causing more people to rent.
“Yes, incomes are going up, but people didn’t just wake up and all of a sudden find $500 more bucks a month to pay for housing overnight in the last three to five months,” Zhu told an attendees at Loews Miami Beach Hotel.
Where Are People Living?
The most popular places are Morningside, Overtown, Wynwood and Spring Garden, according to Rent.com’s data. There, one-bedroom apartments rent range between $1,750 and $3,214.
The most affordable neighborhoods in Miami-Dade are Culmer, where the average rent for a one-bedroom is $1,295; West Kendall, where the average is $1,300; Little Havana, where the average is $1350; and The Roads or Little Haiti, where rent ranges between $1350 and $1,450, compared to the cities average.
“There’s so much change happening in a lot of cities, pricing going up and we have not been building the required amount of homes since the Great Recession,” said Zhu.” When we look at the mortgage rates, there’s a research group that said if house prices rise 5% more or the mortgage rate goes up another 50 bits, you will be at the most unaffordable level based on income to value in the payment ratios you have to pay to buy a home ever in history.”
Zhu said 30% of gross monthly income is supposed to be used on housing, but according to Real Estate Witch’s report, 58% of renters are living paycheck to paycheck.
About 10% of the most populated metros have a rent-to-income ratio that is over 30%. Miami has a ratio of 33%.
The most expensive neighborhoods in Miami are Park West with the average rent for a one-bedroom at $4,200. Brickell Key residents pay an average of $3,900 and renters in Miami’s Financial District, Brickell and downtown pay between $3,620 to $3,900 a month on average for a one-bedroom.
According to Real Estate Witch, the pandemic has caused people to seek more space and amenities, which has driven the median monthly rate for a three-bedroom apartment up 169% since the ’80s.
The report says 36% of cities are building rentals with larger square footage to accommodate the needs of families, remote workers and online learning.
Whether those apartments are affordable is a different story, as Zhu said he doesn’t believe the trend will slow down in the short term.
“[With] 30% of your income going to housing, that means you have to make, all of a sudden, $18,000 more a year in order to afford the same house. That’s not something people can just easily absorb, so a lot more are renting by necessity,” said Zhu. “I think it will lead to a lot more demand for single-family rentals.”