Orlando housing, rent explosion to continue in 2022, analysts say

The new year will bring only minor relief from exploding rent and real estate prices, analysts say, setting up a continued period where Central Floridians feel priced out of their own communities.

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Two analysts that spoke to Eyewitness News forecast that the increase would not match the speed of price hikes seen during the last half of 2021, but both said there was a lot of uncertainty as the market prepares for the spring and summer housing season.

“If we had talked six months ago and we said, ‘Rent prices [are] naturally going to be up 20% on average at the end of the year,’ I would have said that you were crazy,” Rent.com Senior Managing Editor Brian Carberry said.

On the housing side, Keller Williams agent and investor Ray Lopez called the first weeks of January “as slow as we get.” Still, he said he was taking daily calls from non-Florida residents and watching his website traffic tick up.

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Read on to find out what each analyst says about the year ahead.

Renting

To no one’s surprise, Florida saw some of the highest rent hikes in the nation in 2021, thanks to an avalanche of northerners and Californians looking to relocate in a warm, more tax-friendly environment.

Rent.com’s latest data showed Orlando’s average one-bedroom downtown apartment increased 38% year-over-year, far above the 20% national rate and 5% typical year increase.

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However, Carberry said Orlando’s increase was more modest than other Florida cities like Jacksonville and Tampa, and far less than places in Arizona, which he said topped the list.

“I don’t think this is a sustainable rent price growth that we’re seeing right now,” he said.

Carberry said renters were getting some relief right now, with the average one-bedroom unit decreasing by $100 during the month of December. He said prices would remain mostly flat, month-to-month, until later in the year.

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“The big question mark will be, what happens in the summer? Because that’s when we started to see prices really taking off last year,” he explained. “I don’t think they’re going to increase at the level that we’re seeing right now, but I do think rent is going to continue to get slightly more expensive.”

Lopez said national rent prices are expected to tick up 7% in 2022 — more than house values will appreciate, though Florida almost always lands above the average. However, it will deepen the wedge in wealth between those who rent and the people who invest in a property.

“Our state is set up for you to be an owner,” he said.

For families who wish to continue in their current location, Carberry advised trying to negotiate with the landlord. Some, especially mom-and-pop landlords like Lopez, may be willing to compromise slightly on their rent increases in order to keep tenants who they know don’t cause problems and pay their rents on time.

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For tenants who will be forced to move, Carberry advised a tighter budget.

“Don’t overextend yourself, because you don’t want to get yourself into a situation where you’re going to be unable to afford the rent and you’re going to be that problem,” he said.

Buying and selling

Like rental units, Lopez didn’t believe prices would increase as dramatically as 2021, which saw home values in Florida rise by 20%.

However, the Central Florida market is still being driven by a shortage of available homes. Lopez said approximately 3,200 units were on the market as of the beginning of January, about a third of the normal number of listings.

“Supply and demand dictate everything in sales, including housing,” he said.

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In 2022, demand will continue to be fueled by the large number of people trying to move to the region, many with money to spend.

As such, Lopez forecast an 8% to 10% increase in home values this year, though he left a lot of wiggle room as the situation changes. He also predicted a return of bidding wars that frustrated would-be local buyers, and often priced them out of their desired choices.

The good news, he said, is that interest rates are expected to rise several times in 2022, which might dissuade a handful of people. He dismissed fears that those increases would damage the housing market.

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“Investors don’t like to see [that] because they’re scared that real estate will go down,” he explained, “They don’t understand we’re at a deficiency in the market and homes to sell.”

Higher interest rates do affect first-time homebuyers more, as they tend to have lower down payments, so Lopez advised those buyers to begin their hunts sooner rather than wait. Locking in a better interest rate early would also mean they’ll lock in their home before the spring and summer high season, and may have an easier time converting that home into an investment property when they are ready to move on.

His prediction would mean an extension of the seller’s market Orlando has seen for more than a decade — far longer than the typical five to seven years. He said he expected a cooldown after a couple more summer seasons.

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“There’s got to be some sort of leveling,” he said.

Leveling is not a direction many would-be buyers want to see, though. Lopez said the days of snagging a home in Orlando for $95,000 were over. Builders aren’t creating homes for imaginary buyers like they did before the Great Recession, he explained.

However, Lopez warned buyers that the housing market, as crazy as it was last year, wasn’t even at full throttle.

“One in four of our transactions are international buyers,” he said. “Since COVID happened, we haven’t had any of those people in the market. That’s a whole [other] 25% of the people that are going to be competing with all the people that are competing right now.”

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