AUSTIN, Texas — Those looking for a place to rent or whose leases are up for renewal may find a better deal soon.
Austin Investor Interests, LLC tracks multi-family housing in the Austin metro area. Their third quarter data shows that the city's average monthly rent is $1,603.
“Occupancy rates continued their downward trend for the eighth consecutive quarter, falling 0.8% to 90.3%, marking the lowest point since 2009. Simultaneously, rents saw a decline of 3.07%, falling to $1.86 psf.(per square foot),” the report states.
The report shows the average price for rent in the Austin metro was $1,332 a month in the first quarter of 2021. So, while prices are trending downward, the price has not fallen to levels before the recent housing boom.
The peak price for an average monthly rent payment reached $1,742 in the second quarter of 2022, the report shows.
But the report doesn't just show lower prices. It also indicates that incentives for people to sign a lease have also increased.
“The last three years, we just had a euphoric market with so many tenants moving in from the East and the West Coast. And so developers, of course, recognized this demand. They all jumped in there. Everybody's building. Now we have over 60,000 units currently under construction, and this amounts to nearly 20% of our current inventory,” said Robin Davis, the owner of Austin Investor Interests, LLC.
Davis told the KVUE Defenders that fewer people are moving to the area. Of the 60,000 units under construction, about half are slated to be finished within a year.
“That would fulfill the demand that we were previously experiencing,” Davis said.
Most of the new units are set to be leased at the current market rate.
“By this time next year, the market is expected to have an additional 29,869 new conventional units, 6,000 affordable units and over 1,600 student or senior units,” the Austin Investor Interests, LLC report shows.
The areas growing the most include Williamson County, North-Central Austin, southeast Austin, East Austin and Hays County. The report shows those areas will add between 22% and 34% more units over the next year to their existing inventory.
Davis said some units are planned but are currently on hold.
“The sales market is a little bit precarious right now because I think that we're seeing a lot of the investors’ loans coming to maturity, and so to consider refinancing at the current rates is going to force some owners into selling. Anybody who has bought over the last couple of years, you know they may have a significant challenge ahead of them to let go of that real estate without a loss,” Davis said.
The report shows that the monthly rental cost is –8.92% in annual change in northwest Austin.
The prices fluctuate based on the location. The Bastrop area shows a 4.92% increase in monthly rental rates since last year but down since last quarter.
Bastrop is also the area with the lowest price per square foot, with the report showing an average rent price of $1.55 per square foot and an occupancy rate of 97.4%.
The most expensive area is around Downtown Austin, averaging $3.07 per square foot.
The report shows the northeast ($1.70 per square foot), northwest ($1.67 per square foot) and southeast ($1.71 per square foot) areas of Austin have the lowest prices within the city’s limits.
Davis said the rates may continue to fall.
“You know, over 30,000 units is a lot of units we haven't experienced in this market. We've averaged about 13,000 conventional market rate units per year," he said. "And so, that's a lot of units in comparison to what we're used to. And that's coming online during a period of time when we're anticipating a lesser number of people to move into the area."
The KVUE Defenders also pulled the latest economic report from the Federal Reserve Bank of Dallas and reports from the Texas Real Estate Research Center at Texas A&M University.
Dallas Fed survey respondents echoed Davis and told Dallas Fed interest rates slowed business. One respondent wrote, “We cannot refinance properties. We are feeling the pain.”
“Our phone is ringing - mostly apartment owners who are in trouble and need help. Also, deal makers looking to capitalize on newly reset property values. Higher interest rates and insurance costs are killing off over-leveraged deals. Once the lenders and investors involved in these have taken their licks, the multifamily market will head back up again,” the Dallas Fed website shows from one real estate respondent.
The Real Estate Research Center also showed that while there has been a drop in the rent index, Austin's still remains higher than Dallas, Houston and San Antonio.
“It's serious … If you're a developer or an investor, this is not fun news,” Davis said.
Boomtown is KVUE's series covering the explosive growth in Central Texas. For more Boomtown stories, head to KVUE.com/Boomtown.