Austin Rental Market Update – 2006 Summary

Finally, after four consecutive years of declining average rents, the Austin rental market turned around in 2006. Though only a modest increase of 1.4% over the 2005 average rental rates, it’s the change in direction that’s important. Austin absorbed 35% more rental homes in 2006 than 2005. The market is very strong but supply remained high most of the year, holding down rental increases. In a normal market, without the additional supply, an increase in demand of 35% would have resulted in a landlord’s market and we would have seen much better rent increases. The days on market for 2006 dropped 10% from an average of 60 days in 2005 to 54 days in 2006 – another indicator that rental vacancies are becoming easier to fill, though 54 days of vacancy would make most investors nervous and unhappy.

Tenants have had a sweet ride the past 5 years, and Austin rental rates still remain below the 1999 rates, but it looks like things have finally leveled out. I have the usual charts and graphs below, including a breakdown by MLS area. I’ll be working on the end of year Sales summary next and also a couple of additional stats projects I hope to complete, including a look at Duplex rental rates and sales value trends, which I’ve had a lot of requests to do. Stay tuned.

Austin Rental Market Historic Rental Rates Graph

Below is the year-over-year summary for December. December rents are up 3% over last year, better than 2006 as a whole. I think we’re going to continue to see increasing increases (is that the right away to say it?) throughout 2007 as investment activity slows a bit and inventory and demand come closer to being in balance.


Austin Leasing Stats December 2006
Previous Month and Year Comparison
All MLS Areas - Houses Only

 
Nov 2006
Dec 2006
Dec 2005
Yr % Change
# Leased
559
538
502
7%
Avg List Price
$1240
$1248
$1192
5%
Median List Price
$1150
$1150
$1100
5%
Avg Leased Price
$1230
$1238
$1197
3%
Med Leased Price
$1150
$1150
$1095
5%
Avg Size SQFT
1858
1864
1811
3%
Median SQFT
1748
1747
1745
0
Avg $ per SQFT
$0.66
$0.65
$0.66
-2%
Avg Days on Mkt
55
60
59
2%
Median Days on Mkt
43
51
50
2%

Below is the chart for all of 2006 compared to all of 2005. The most interesting number to me is all of the additional rental homes that were absorbed by the market this year – a 35% increase in number of homes leased from 5,949 in 2005 to 8,042 in 2006. That’s a lot of new renters considering we’ve had a very strong sales market as well.

Austin Leasing Stats December 2006
Year to Date Previous Year Comparison
All MLS Areas - Houses Only

 
All 2006
All 2005
Yr % Change
# Leased
8042
5949
35%
Avg List Price
$1268
$1249
1.4%
Median List Price
$1150
$1150
0
Avg Leased Price
$1256
$1237
1.4%
Med Leased Price
$1150
$1150
0
Avg Size SQFT
1850
1806
2.4%
Median SQFT
1750
1701
2.9%
Avg $ per SQFT
$0.68
$0.68
0
Avg Days on Mkt
54
60
-10%
Median Days on Mkt
43
48
-10%

Below is the breakout of 2005/2006 leasing stats by MLS area. I’ve added an additional column this month. Under “# of Homes Leased” I’ve added the percent change from 2005 to 2006. This number reflects the growth or decline of homes rented in each particular MLS area. It’s interesting to see how many rentals have been added to some of the areas of Austin. There isn’t necessarily an across the board correlation in an increase in homes for rent and the rental rates. Too many other factors are at play, such as the size and price of the new rental stock being introduced into an area.

For example, area HD (Dripping Springs) has leased 115% more homes than last year, and the average rental rates are up 13% because much of that new rental stock are new homes in Belterra which lease for $1600 and up. Round Rock is up 61% in number of homes rented, and the rental rates stayed about the same. Citywide, we’re up 35%, so areas adding more than 35% are increasing the rental stock faster than the Austin area as a whole. Areas that are doing this and also seeing a drop in rental rates are generally areas with a disproportionate number of starter home neighborhoods, which also attract a lot of investors due to better cash flow ratios, but which we advise investors to stay out of.

I’ve highlighted in red the areas with falling rents. Out of these 11 areas with falling rents, 10 are east of IH35 and most are in areas with heavy growth in starter homes. The only down area west of IH35 is area LN, which is fairly far out NW of Austin, west of Cedar Park and Leander and north of Lake Travis. I’m not sure why it’s down.

I’ve highlighted in green those areas with 5% or better increases in average rental rates. Of these 20 areas with this better rent rate growth, 11 are in close proximity to Austin. Of the remaining 9, 6 have very low sample sizes (so I question their meaningfulness) and the other three are West or SW of Austin (LS, HD, HW).

I’m personally still very much in favor of a “buy close in” strategy for Austin real estate investors. The newer areas further out make me nervous for a variety of reasons. And I have a hard time believing areas like South Austin, SW Austin, and the closer in areas in NW Austin will do anything other than see steady appreciation in the coming 5 to 8 years.

If your not sure where each MLS area is located, there is an Austin MLS map at the bottom of this page which you can reference.
Feel free to post any comments, observations or questions you have about the data. Next week I should have similar charts up for sales data in Austin.

Austin Leasing Stats - Year 2006 Final
by MLS Areas- Houses Only

MLS Area
# of Homes Leased
Avg $
Amt Leased
Avg
SQFT

Avg $
Per
SQFT

Avg
Days
Avg Yr Built
2005
2006
%Chg
2005
2006
%Chg
Area 1A
34
26
-24%
$2045
$2101
3%
2225
$0.94
36
1978
Area 1B
198
193
-3%
$1676
$1847
10%
1593
$1.16
44
1947
Area 1N
174
191
10%
$1261
$1370
9%
1831
$0.75
42
1983
Area 2
128
146
14%
$1052
$1152
9%
1222
$0.94
38
1957
Area 2N
117
133
14%
$1015
$1063
5%
1446
$0.74
56
1975
Area 3
137
169
23%
$1095
$1123
3%
1389
$0.81
51
1962
Area 3E
26
61
135%
$976
$1067
9%
1448
$0.74
67
1994
Area 4
132
161
22%
$1422
$1556
9%
1395
$1.12
52
1955
Area 5
83
147
77%
$994
$1011
2%
1215
$0.83
58
1968
Area 5E
40
70
75%
$1030
$1008
-2%
1674
$0.60
70
2002
Area 6
71
104
46%
$1359
$1390
2%
1266
$1.10
39
1954
Area 7
37
28
-24%
$1455
$1572
8%
1439
$1.09
37
1957
Area 8E
41
40
-2%
$2456
$2631
7%
2412
$1.09
39
1978
Area 8W
89
93
4%
$2124
$2155
1%
2494
$0.86
41
1990
Area 9
26
20
-23%
$1140
$1114
-2%
1371
$0.81
41
1977
Area 10
447
588
32%
$1086
$1144
5%
1530
$0.75
43
1986
Area 11
89
129
45%
$985
$994
1%
1449
$0.69
58
1989
Area BA
75
74
-1%
$991
$982
-1%
1641
$0.60
40
1986
Area BL
-
-
-
-
-
-
-
-
-
-
Area BU
2
4
100%
$1042
$1097
5%
1589
$0.69
35
1985
Area BW
11
16
45%
$965
$971
1%
1572
$0.62
61
1987
Area CC
4
5
25%
$986
$895
-9%
1294
$0.69
29
1987
Area CL
738
975
32%
$1130
$1173
4%
1994
$0.59
53
2000
Area EL
13
19
46%
$914
$1025
12%
1890
$0.54
73
2001
Area FC
-
-
-
-
-
-
-
-
-
-
Area GP
-
-
-
-
-
-
-
-
-
-
Area GT
118
165
40%
$1150
$1181
3%
1855
$0.64
52
1995
Area HD
40
86
115%
$1483
$1675
13%
2243
$0.75
59
1999
Area HH
301
419
39%
$1077
$1078
0%
1816
$0.59
53
2003
Area HS
21
8
-62%
$1058
$1114
5%
1769
$0.63
92
2002
Area HU
177
273
54%
$1064
$1030
-3%
1884
$0.55
68
2004
Area HW
28
33
18%
$1124
$1236
10%
1741
$0.71
73
?
Area JA
2
3
50%
$1000
$1383
38%
1604
$0.86
58
2004
Area LC
-
-
-
-
-
-
-
-
-
-
Area LH
2
4
100%
$1047
$1400
34%
1928
$0.73
23
1983
Area LL
-
-
-
-
-
-
-
-
-
-
Area LN
55
81
47%
$1261
$1244
-1%
1683
$0.74
62
1987
Area LS
170
193
14%
$1672
$1767
6%
2157
$0.82
54
1993
Area MA
100
139
39%
$1117
$1041
-7%
1822
$0.57
80
2004
Area MC
-
-
-
-
-
-
-
-
-
-
Area N
161
172
7%
$1162
$1185
2%
1736
$0.68
48
1990
Area NE
100
199
99%
$1060
$1134
7%
1799
$0.63
57
1997
Area NW
241
259
7%
$1211
$1276
5%
1916
$0.67
49
1986
Area PF
455
648
42%
$1197
$1144
-4%
1936
$0.59
62
2000
Area RN
53
113
113%
$2312
$2310
0%
2876
$0.80
53
2001
Area RR
775
1244
61%
$1176
$1186
1%
2024
$0.59
58
1999
Area SC
20
50
150%
$1258
$1186
-6%
2022
$0.59
55
2000
Area SE
33
64
94%
$1040
$1057
2%
1875
$0.56
70
2002
Area SV
6
6
0%
$1083
$940
-13%
1560
$0.60
53
1976
Area SW
311
415
33%
$1470
$1480
1%
2139
$0.69
46
1995
Area TC
9
16
78%
$837
$816
-3%
1447
$0.56
61
1975
Area W
56
67
20%
$1651
$1754
6%
2150
$0.82
58
1989
Area WE
-
-
-
-
-
-
-
-
-
-
Area WW
-
-
-
-
-
-
-
-
-
-

Austin MLS map.

Posted by Steve
9 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

Click Here to Leave a Comment Below

Jim - 9 years ago

Steve,

Thanks for all the research, it helps to have the latest on rental stats.

Jim

Reply
scott - 9 years ago

Steve, what’s your opinion about trying a 5 year equity/negative cash flow play in the westlake/eanes school district area? Thanks

Reply
Steve - 9 years ago

Hi Scott,

> what’s your opinion about trying a 5 year equity/negative cash flow play in the westlake/eanes school district area?

That would be a question for your accountant. All I can do is help you make the best guess and estimate of what your possible appreciation might be. It’s certainly a great area in Eanes and I think prices will continue to go up because of the great location and the scarcity and high cost of buildable land.

Steve

Reply
Hass - 9 years ago

Thank you for the great summary. I am looking for an investment property that will appreciate in the next few years and will generate a positive cash flow with 10% down payment. From your experience, which areas are best to invest in: Vacancy rate

Reply
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