10, September 2016: Recently the property market has been heating up in the US. Rental growth is accelerating, and there are opportunities for property investors to make a substantial return. However, much of the press coverage has focused on West Coast cities like San Francisco. It should be reiterated that the rise in rental prices is not just a West Coast phenomenon. It’s something that is happening all over the country.
Rental Rate Hikes in the Southeastern US
In the Southeastern US, for instance, there’s a dramatic increase in rental prices in the main urban areas like Orlando. Average rents in Orlando are moderate at $1,120. But rental growth is expected to grow by more than 6.3 percent. That puts Orlando ahead of places like Miami, Tampa and Jacksonville. Part of the rise in house prices can be explained by the growth in the job rate in Orlando. Year-on-year job growth in the area currently stands at an impressive 3.5 percent. Job growth is drawing people into the metro area, and that is what is putting upward pressure on rental prices.
Poor Rental Performance in Northeast
Compared to northeastern US metros, southern metros are performing well. Rental rates are expected to rise a mere 1.0 percent in Baltimore this year. In Washington D.C., prices will rise just 1.2 percent. In Philadelphia, things are a little better, but not by much. Rents are expected to rise by 1.3 percent at most. Finally, in Richmond, the forecast growth in rents presently stands at just 1.4 percent. It appears, therefore, that the south-east and the west of the country are the best places for property investors to put their money.
Orlando property managers expect that rental prices in the area will continue to grow. This is partly due to the national trend of rising rental prices and partly because of Florida’s appeal. Recently, Florida ranked as the most desirable US state in which to live. It’s an accolade that the state has been without since 2001. But now it has been returned.
Florida an Attractive Place to Live
Florida was ranked highly because of its waterfront and sunshine. California, which came in second in 2015, also scored highly, again because of its favorable weather and extensive waterfront areas. For investors, it is interesting that Americans value good weather and being by the coast. California has enjoyed rapid rental growth rates recently. Florida, which has many of the same lifestyle features as California looks to be following suit.
Home Ownership Declining, Rent on the Rise
Right now in the US homeownership rates are at historically low levels. There is a lack of affordable housing options for low- and middle-income families across the country. As a result, demand for rental accommodation has been steadily rising. The national average rent for an apartment is currently $1,181, as of March this year. That’s 5.7 percent higher than it was in March 2015.
Rising rents present an opportunity for investors looking to rent out property. Focus at the moment is on opportunities on the west coast. But rents in places like San Francisco are already averaging over $2,400 for a studio and $4,800 for a two-bed apartment. Cities like Orlando, on the other hand, have healthy rental price growth and affordable prices for tenants.
Note: The reported statistics in this article are from Yardi Matrix Monthly, a report compiled by market intelligence company Yardi Matrix, covering 113 US markets.