Rental Property Investor · Austin, TX · Member since 2016 · 317 posts · 257 votes
I see a lot of folks looking through rosy-eyed glasses lately. When the all the stimulus, forbearance, eviction moratorium, etc. goes away, reality takes hold. My market opinion has been an unpopular one but I still contend you can only kick the can down the road so far.
Two paragraphs that stand out to me and that I agree with:
‘Rieder said he foresees declines in apartment rents and occupancy rates in the short term, but has a positive outlook for the future.
“We can’t go from roughly 2% unemployment to over 11% today without it adversely affecting the rental market,” Rieder said. “However, Austin remains an attractive market for both lifestyle and employment and we are still very bullish on Austin over the long term.”’
Last, but not least, Texas (especially Austin and DFW) will continue to see a lot of migration. It will also continue to attract many businesses relocating here as we are a very business friendly state while places like California and NYC will get hit hard.
Oh, one final thing......they discussed A level properties....with interests rates as low as 2.65 I can see why someone renting in the high end apartment will want to buy instead of rent! Class B And especially C, rental demand will always be there with these jobs being created as we recover from Covid. 35,000+ metropolitans in the US and only 53 of those are positioned to stand strong amidst all this. ATX and DFW are part of those 53.
I'd like to see the distribution of the drop, from lower cost/more affordable housing to high-cost housing. The temptation is to say that the drop is likely at the high end of the market as folks downgrade or move due to telework opportunities, but that may not be the case.
Two paragraphs that stand out to me and that I agree with:
‘Rieder said he foresees declines in apartment rents and occupancy rates in the short term, but has a positive outlook for the future.
“We can’t go from roughly 2% unemployment to over 11% today without it adversely affecting the rental market,” Rieder said. “However, Austin remains an attractive market for both lifestyle and employment and we are still very bullish on Austin over the long term.”’
Last, but not least, Texas (especially Austin and DFW) will continue to see a lot of migration. It will also continue to attract many businesses relocating here as we are a very business friendly state while places like California and NYC will get hit hard.
Oh, one final thing......they discussed A level properties....with interests rates as low as 2.65 I can see why someone renting in the high end apartment will want to buy instead of rent! Class B And especially C, rental demand will always be there with these jobs being created as we recover from Covid. 35,000+ metropolitans in the US and only 53 of those are positioned to stand strong amidst all this. ATX and DFW are part of those 53.
I'd like to see the distribution of the drop, from lower cost/more affordable housing to high-cost housing. The temptation is to say that the drop is likely at the high end of the market as folks downgrade or move due to telework opportunities, but that may not be the case.
I am not surprised to see this as due to covid a lot of apartment dwellers are moving to SFR. I listed two SFR last Friday and they both leased out in 2 days. Most of the tenants I am getting are moving from out of town to Austin or they are in town folks wanting more space.
As @Neil Narayan stated, I'm seeing a huge migration of people from apartments to single-family and duplex properties to get more space and a backyard. Along with higher unemployment, this will naturally have a downward effect on apartments. Single properties however are seeing an uptick in rental demand, at least from my recent activities.
I wish that they had broken the occupancy down a bit further by classes such as class a, b, c and d properties or even by area. Oh well. I am seeing folks moving from apartments to buying as interest rates are so low presently. With the rate of job growth especially in Tech I think that we are in very good shape relatively speaking. There is a big time building boom going on.
According to this publication Austin is leading the nation in apartment construction.
I think everything looks great especially with the job growth and the fact that a couple of major industries are still being affected such as the hospitality sector and we are still at 7.5% unemployment. I like to look at things over the long term. But as my friend @Stephen Stokes says rosy colored glasses can influence thought processes. Very few folks saw the last housing crash coming except for the folks doing the liar loans.
@Stephen Stokes, Yes I am one of those with Rose Color Glasses and you my friend will be singing the blues about rental prices for a long time before your right. Remember, even a broken clock is right two times a day.
Here is why the article was written as stated in the article:
“The bottom line, this is a great time to look for an affordable apartment in Austin because prices are decreasing, and renters may have a little more negotiating power than they normally would,” Carberry said.
Generating enthusiasm for rental clients? I would be VERY FEARFUL if I was a renter, especially when my lease expires. More likely the rent goes up or stays the same which is crazy high to begin with. I have 10 units in the Austin MSA dating back to 2005 and I manage another 4 units in the MSA. I have never lowered rents due to the economics of the area.
Even the article states the decline is a whopping 2.6%. That is a drop of $26 on a $1000 rent. Are you kidding me. Is there anyone out there that is renewing their tenants with a 2.6% decline. And if you are lowering on average 2.6% does that bother you? Especially when you have raised rents 30% over the preceding 5 years? If I am given a 30 notice from a current tenant then my turnover will be Zero days and usually the rent increases. Most of us mom and pops are slow to raise rents on existing tenants. All of my tenants do not get a rent increase on year two. I can't in good conscience keep up with current rents. I welcome any and all tenants to move because I have no problem getting back to market rents on new tenants. Here are the break down of the 14 units in terms of length of time in the unit.
1 unit 15 years started at 725 now 1100
1 unit 7 years
3 units 5 years
4 units 3 years
1 unit 2 years
4 units 1st year
All of my 1st year tenant's rents were increased from the outgoing tenant. All of my multi-year tenants are what I consider below market because i typically don't raise every year. When I do raise, I usually keep them there for at least another two years. I normally don't raise existing tenants to market rents when I do raise. My units are the best on the block, problems handled in 24 hours and my occupancy rate is 100% last 5 years, unless I elect to do significant upgrades to the unit I am fully occupied. My tenants staying in Austin don't move, unless they are moving in with a significant other.
Here is the bottom line: If the community is growing in population and jobs are readily available rents are going up. Don't worry about day to day fluctuations. I don't even worry about what the rent is in the local area. I always improve my properties and have an abundance of tenants from which to choose.
You can warn about the property prices or the traffic or the Corona but don't worry about the rents, we're on stable ground! Cheers!
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