The Miami Herald recently reported on 1/18/2011 that the Miami Rental Real Estate Market was on a major upswing. Rents seem to be climbing at a very fast pace, especially in areas like Downtown Miami and Brickell. Much of this rise in rent is attributed to the low inventory levels of rental units. The Herald goes on to quote renters stating that their rents increased as much as 29%! Occupancy rates are as high as 95%.
The article goes on to reason why such increases in rates and decreases in inventory are occurring. Booming neighborhoods and young professionals looking to re-enter the rental market in a recovering economy are cited as some of the reasons why this rental market is booming. Although I most certainly agree with this reasoning and in fact would support them, I would also add to the formula the foreclosure market. Keep in mind that we are still experiencing a very high foreclosure rate and as more homes are turned over to the bank we will see more and more displaced homeowners entering the rental market. When this occurs not only do you have a person or family who once owned their home now occupying a rental property but the property that they once owned does not enter the rental pool of inventory. With that said you could rationalize that in many cases a foreclosure affects the rental pool of inventory by two properties, the one the ex-owner now lives in and the one that they never vacated as a rental property.
So what can we expect? I believe that the rental rates will taper off at the maximum that the market will tolerate. Sometimes landlords list a bit too high and find themselves lowering the rate once they realize that tenants are avoiding the unit. So as a tenant don’t be shy about making a reasonable offer, the operative word here being “reasonable”. We may see some additional units enter the market as buyers of new construction fail to close and developers find themselves turning to the rental market to generate income from vacant properties; hopefully this will alleviate stress on the inventory and also help to level prices a bit.
Overall renting is still a great option for those that are not ready to buy or feel that he market has a bit of “drop” still left in it before purchasing. With this in mind, it is never a bad idea to work in an escape clause to a lease in the event that you do find that dream home to purchase.
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