In recent years, renting has become more and more expensive, especially since the start of the COVID-19 pandemic.
Although national rent growth has cooled compared to double-digit increases in recent years, it remains in line with pre-pandemic levels. In November 2023, CoreLogic reported a 2.7% annual increase in US single-family rents. But the narrative is more complicated in niche markets like the Texas capital of Austin.
Social media posts have fueled speculation that Austin’s rental market is on the upswing. Nick Gerli, CEO of Reventure appsays that rents for apartments in the city center have fallen by 15% in the past two years. He cites high vacancy rates and rents that are “only 9.8% higher than pre-pandemic levels.”
Gerli said HousingWire in an emailed response that normal market conditions will be reflected in the gradual decline in rents.
“What Austin sees is not that,” he said. “Apartment rents have fallen by almost 15% in two years, which is an extraordinary pace in the housing market. In addition, apartment and SFR (single-family rental) operating costs have increased significantly since 2019 due to higher property taxes, insurance, and payroll costs. Which means margins are being squeezed hard.
“Austin fits the classic example of a boom/bust housing market, where the collapse happens.”
Austin’s rental prices have seen significant growth since the start of the pandemic. In accordance with Zillowthe city’s median rent for all property types stood at $2,025 as of Nov. 20 — $4 below the national average.
Clare Knapp, housing economist Austin Board of Realtorscontradicts the view of the fall “Austin is not the same Austin as it was eight years ago,” he said.
The data support Knapp’s hypothesis. Study of Altos reported that the average rent for an apartment in Austin was $1,695 in November 2024, while single-family homes rent for $2,300 on average.
In January 2017, Altos recorded an average rent for an apartment in the city of $1,265. And in January 2020, just before the pandemic, the average rent for an apartment was $1,400. By January 2022, they had risen to $1,612.
The easing of the pandemic in 2021 brought an increase in demand for rental properties in Austin, with vacancy rates falling from 7.8% in January to 3.9% in September. As demand increases, rental prices also rose from $1,289 in early 2021 to a peak of $1,725 in August 2022, according to data from List of Houses.
However, the rental market is correcting. Knapp notes that Austin saw an increase in active listings in the first half of 2024, providing renters with more options. “The amount of extra supply in the market has made buyers more sophisticated,” he said.
“I would just say that the rental market is still much stronger than the residential or commercial market,” Knapp added. “But you know, we’ve seen signs now in the last few months that it’s slowing down. That is a very high inventory factor. “
Knapp said that while the market is finding a new normal, he thinks there have been no “significant changes” that would signal doom and gloom.
Filling function
Bryan Lawrence, senior vice president of consulting at John Burns Research & Consulting (JBREC) said the company rates the Austin market as slow – the result of an influx of new properties coming to market in recent years.
“Austin saw nearly 25,000 new apartment completions in the 12 consecutive months in the second quarter of this year, equivalent to 7.9% of inventory, with another 38,000 apartments under construction (12.2% of inventory) to come. delivered in the coming months,” Lawrence wrote.
JBREC is predicting that the lease activity is winding down rather than experiencing major problems, Lawrence said.
“Year-over-year, rental housing is down -7.5% YOY (-14% from high) as of October 2024. We believe that prices (including interest rates) remain high for a long time to slow any increase in construction activity in the near term,” he wrote. “JBREC is not predicting meaningful rent growth until 2026 and beyond, which will make new project development difficult.”
Carl Whitaker, director of research and analysis at RealPagehe said the period of oversupply would be temporary.
“Using 2017, 2018 as a benchmark, deliveries should start to look normal in 2027, 2028, so I think the fundamentals of the market will start to change very soon. And we could be four years from now talking about a marketplace where we’re asking, ‘Are we delivering enough housing?’ again. And I think that’s a real consideration,” Whitaker reflected. “I think we could be talking about a place where the lack of housing is back in balance.
To say the market is falling may be an overstatement of what’s happening, Whitaker added.
“Really, what we’re seeing is that Austin is like an example where you’re getting more than enough to satisfy the need,” he said. “And the demand in this market is still strong. … We’re seeing prices change faster in Austin than anywhere else in the country.
“So, I think from that point of view, it’s fair to say that there is a tangible decline in hiring levels. But to say it’s falling, I think, is probably unfair, because it’s still strong.”
Whitaker said the data should drive the story of Austin’s rental market. Local data, for one, shows Austin at 92.5% occupancy — one of the lowest numbers RealPage has recorded since 2010.
“You have a point of comparison that you can’t say, coming out of the big financial crisis [was the] the last time Austin saw this much space in the market,” he said. “But again, from that same perspective, occupancy is up about 10 to 20 points since the beginning of the year, and vacancy is down about 10 to 20 points.
So, it’s not ‘normal’ compared to the long-term average, but normal compared to where the year started.”
A better way to describe the Austin market is “steadiness,” Whitaker said. He also pointed out that Austin saw a lot of job-motivated movers after the pandemic, which fueled the housing market at the time and caused the city’s employment rate to skyrocket.
“If you were to draw a trend line from 2019 to today, today’s numbers are where the market would be in 2019 with supply and demand, if that pre-pandemic growth rate had continued,” he said.
“It’s standard, but it feels like a dramatic correction from where it was in 2021 to 2022. … This is not unique to Austin. This is something we see in many other markets.”
Related
Source link
