Florida Homes Sitting Empty as Housing Market Tumbles in Some Cities
According to recent research by Construction Coverage, the Cape Coral-Fort Myers metropolitan area in Florida has the highest share of vacant rental homes in the entire country, with an average of 15.3% of rental homes sitting empty in 2023, up from 8% the previous year. The median monthly rent in the area also increased from $1,708 in 2022 to $1,967 in 2023, while the percentage of cost-burdened renters rose from 56% to 59.3%. Other Florida metro areas, such as Jacksonville, Tampa-St. Petersburg-Clearwater, and Miami-Fort Lauderdale-West Palm Beach, also ranked among the top 25 areas with the highest rental vacancy rates.
The report attributes the higher vacancy rates in southern and midwestern states to an increasing supply of rental units. At the same time, demand remains high in western and northeastern states, leading to lower vacancy rates. Florida and Texas have been building some of the highest numbers of new homes in the country, contributing to the growing inventory and higher vacancy rates.
Our take:
The rising rental vacancy rates in Florida's housing markets, particularly in the Cape Coral-Fort Myers area, are a significant concern for real estate appraisers and market participants. High vacancy rates can impact property values, rental income projections, and overall market stability.
It is crucial to carefully analyze and consider these market trends when valuing properties in the affected areas. The increasing supply of rental units, coupled with the declining demand and affordability issues, could lead to downward pressure on rental rates and property values. Appraisers must thoroughly research and understand the local market conditions, including vacancy rates, absorption rates, and rental rate trends, to provide credible and well-supported valuations.
Appraisers should be aware of the potential impact of high vacancy rates on the risk associated with income-producing properties. Higher vacancy rates can lead to increased expenses, reduced net operating income, and potentially lower capitalization rates, affecting the overall value of the property.
It is essential for appraisers to carefully analyze market data, including recent comparable sales and rental transactions, to identify any potential adjustments or discounts that may be warranted due to the elevated vacancy rates in the area. Collaboration with local market participants, such as property managers and real estate professionals, can provide valuable insights into the specific challenges and dynamics influencing the rental market.
Appraisers should consider the potential long-term implications of these market conditions on the overall housing market in Florida. If the trend continues, it could lead to a shift in demand patterns, with potential buyers opting for more affordable areas or alternative housing options.