Renters in the Austin Metro saw some of the steepest declines in Rental Rates

 Renters in the Austin Metro saw some of the steepest declines in Rental Rates


By Joanne Drilling and Cody Baird 
Author from Austin Business Journal


In recent years, housing affordability has posed a persistent challenge for both homebuyers and apartment renters. In 2023, renters in the Austin metro area experienced some of the most significant declines in rental rates nationwide, according to Rent.com's December market report. The median rent in Austin last month was $1,985, reflecting a 12.5% decrease from the $2,270 reported in December 2022. Among the 50 largest metros in the country, only Salt Lake City saw a greater year-over-year decrease in rental rates, with an almost 21% decline.

RealPage Inc.'s data corroborated these findings, ranking the Austin area as the second in the nation for the percentage decline in rental rates as of November. The average monthly asking rent in Austin during the third quarter was $1,608, down from $1,653 in the second quarter, according to RealPage data.

One significant factor contributing to the decline in rents is the substantial increase in supply, making markets less competitive across the country, a trend expected to persist. During the first nine months of 2023, approximately 18,000 multifamily units were built, with the third quarter alone witnessing a near doubling of production compared to the same period in 2022, from 3,996 to 7,508 units. However, this surge in supply has led to a decrease in occupancy rates, falling from roughly 92% in the year-ago period to around 89% in the third quarter, according to Partners, a commercial real estate firm.

On a national scale, median monthly rents declined by 2% in November compared to the previous year, dropping from $2,009 in 2022 to $1,967. This decline in November marked the first time in more than three years that median apartment rents decreased by more than a single percentage point, signaling a cooling in the once white-hot multifamily market, primarily driven by new supply hitting the market.

The rental housing market, once hailed as a darling of the commercial real estate industry, is now displaying warning signs due to slower growth, reduced demand, high interest rates, and increased operational expenses affecting owners and developers alike. However, rents remain elevated overall, with prices increasing more than 22% or about $355 since November 2019.

In the Midwest, there has been a shift in the hottest apartment markets, with yearly rent growth increasing from 4.08% in October to 4.57% in November. Despite this growth, Midwestern asking rents still lag behind other regions, with a median rent of $1,434, nearly $1,000 cheaper than the Northeast and West, and $200 less than monthly payments across the South. Conversely, all other regions, excluding the Midwest, experienced year-over-year declines in November, representing a sharp reversal, especially for the Northeast, where median rents grew by more than 3% annually in October.

Source from: Drilling, Joanne & Baird, Cody (2024). Austin Business Journal. 
https://www.bizjournals.com/austin/news/2024/01/24/in-insert-market-residential-rents-are-insert-tren.html

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