Austin ranks in the top 13 cities nationally for fastest apartment rent growth since 2010 but that growth appears to be cooling as new supply comes on the market and low- to medium-tier housing faces an affordability ceiling, according to a recent analysis from RealPage Inc.
Austin has seen apartment rents jump 34 percent since 2010, when the market started to recover after the recession, RealPage found. The Texas capital trailed Atlanta, Fort Worth and Nashville, where rents have increased 35.1 percent, 36.2 percent and 36.5 percent respectively over the eight-year cycle.
Three Northern California cities topped the list, with San Jose leading the pack with 51.3 percent rent growth. Denver, Portland, Seattle and Sacramento all made the top 10 list, too.
RealPage, a Texas-based software and data analytics firm, compared changes in rent prices for a sample set of properties over the eight-year cycle. The Austin sample includes about 70 percent of the current housing stock, according to firm. Tracking actual properties provides a more realistic picture of the rental market rather than looking at averages, said RealPage Chief Economist Greg Willett.
“Much of Austin’s rent growth in the current market cycle occurred early. … The growth pace slowed sharply in late 2016 and early 2017, and then change actually went slightly negative right at the end of 2017,” Willett said.
Pricing is down about 0.7 percent so far this calendar year, he said — making Austin the only market among the country’s 50 largest metros that experienced a drop in prices in the last year.
“Loss of pricing power for apartment owners and operators reflects both the big block of luxury product that’s moving through initial lease-up and some limits on the ability to afford higher pricing among residents of middle-range to bottom-tier properties,” he said.
Willet said that much of the price cuts happened in middle-tier to lower-tier products, potentially because middle and low-income residents are reaching the threshold of what they can afford.
In other words, there is still some rent growth but apartment owners can’t expect the same big price jumps they enjoyed for much of the current cycle.
Year-over-year rent growth in Austin has held steady at 2.1 percent, the same as the state average, according to a new report from Apartmentlist.com. However Austin lagged behind the rest of top 10 largest Texas cities, which all saw year-over-year rent rates rise faster. Houston, Laredo and Plano all saw year-over-year rent growth above the state average (2.8 percent, 2.6 percent and 2.3 percent, respectively.)
Currently median apartment rents for Austin stand at $1,120 for a one-bedroom apartment and $1,380 for a two-bedroom, according to Apartmentlist.com.
Signs of a slight slowdown emerged last year as occupancy rates and lease rates started trending downward, according to the Austin Multi-Family Trend Report. Despite the dip, there is still a lot of construction activity and as late last year there was 18,000 conventional apartment units under construction across the metro area.
Rent growth has been steady in Austin for the past year while some other Texas cities see growth continue to climb.
A breakdown in median rents across the Austin area.
The List: Austin-area multifamily development firms
Ranked by Austin area: No. of multifamily units under development or delivered in 2017
Rank Business name Austin area: No. of multifamily units under development or delivered in 2017 1 Oden Hughes LLC 1,315 2 Journeyman Group 1,278 3 Aspen Heights Partners 882 View This List