Multifamily markets in the Northeast tend to be the most overpriced while the Sun Belt and West lead in terms of underpriced apartments, according to a new report.
Researchers at Florida Atlantic’s Real Estate Initiative, along with colleagues at Florida Gulf Coast University and the University of Alabama, statistically modeled historical rents among the 100 largest U.S. metropolitan areas to identify trends used to make predictions about prices as of April 2024. Areas where actual rents are above those predictions were said to have a premium, or to be overpriced relative to expectations. Areas where actual prices were below expectations were said to be underpriced, or running at a discount.
Among the markets the study found to be overpriced, four were in the Northeast. The largest premium came in New Haven, Connecticut, with asking rents 7.51% above the model’s expectation. Other Northeastern markets exhibiting large premiums include nearby Hartford, Connecticut, at 6.59%; Springfield, Massachusetts, at 6.30%; and metropolitan New York City at 6.14% above expectations. Only Madison, Wisconsin, was outside the Northeast among the most overpriced markets, running second to New Haven with a 6.77% premium.
“Put simply, the supply of needed rental units is not keeping pace with the demand for units in the Northeast,” Ken Johnson, a real estate economist at Florida Atlantic University, told CoStar News.
Underpriced markets with the steepest discounts were in the Sun Belt and West, where supply is outpacing demand as a glut of apartment construction has curbed rents. Austin, Texas, has the largest discount at 3.39% below expectations, followed by Boise, Idaho, at 3.06%; Spokane, Washington, at 3%; Phoenix at 2.76%; and Las Vegas at 2.40%, the report found.