When it comes to apartment rents in downtown West Palm Beach, the story is up, up and away. Rental rates are currently increasing 10 to 20 percent over year-ago levels, brokers say.
The price range for one-bedroom apartments now generally runs from $1,400 to $1,500 a month, and the price range for two-bedroom apartments generally runs from $1,800 to $2,300.
It’s a case of demand outstripping supply, local housing experts say. “People don’t realize that when housing prices crashed [beginning in 2007,] rents never really went down,” Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach, told The Real Deal. “More people couldn’t afford or didn’t have the credit to buy homes.”
Demand also has been buttressed by population migration and a growing number of people renting by choice, he noted. “It used to be a stigma if you were a renter — a sign that you were poor. That’s gone now, and it’s a smart decision for many.”
But the rising rents are taking a toll on renters financially. The median annual household income totals $53,000 in Palm Beach County. A family at that level renting a two-bedroom apartment for $2,000 a month would be putting 45 percent of their pre-tax income into rent. A rule of thumb has it that you shouldn’t exceed 25 percent.
“Even if you’re making $50,000 a year, it’s difficult to put away savings, let alone pay all your bills, given all of your money that’s going to housing,” McCabe said.
As for supply, “lack of inventory is the cause for the rent increase,” Mike Fallon, a sales associate in West Palm Beach for McWilliams Ballard, a real estate marketing and consulting firm, told TRD. People who would like to live alone are finding roommates or small studio apartments so that they can afford the rent. “People are putting more of their income toward rent,” he said. Some people are just abandoning downtown, opting to live in cheaper areas like the Villages instead, Fallon said.
Sam Fisch, owner of the brokerage firm Real Estate Solutions in West Palm Beach, told TRD that even his wealthiest clients, who are prepared to pay $3,000 to $4,000 a month for penthouse apartments, are having a tough time finding anything in downtown West Palm. They are looking at Palm Beach Gardens and Delray Beach instead, he said.
As for affordable housing, experts don’t expect the problem to disappear anytime soon. While about 4,000 condo and apartment units are under construction or planned for West Palm, most of that is Class A, luxury development. “That’s where the market is,” McCabe said. “It’s difficult for developers to make affordable projects profitable because of the high costs for land and construction. So they’re all building market projects instead.”